uploads///KSU Carloads

This Huge Fall Impacted Kansas City Southern’s Carloads Last Week

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Sep. 19 2016, Updated 10:05 a.m. ET

Kansas City Southern’s carloads

In the week ending September 10, 2016, Kansas City Southern’s (KSU) total railcars fell 12.6% YoY (year-over-year). KSU hauled ~23,000 railcars last week, as compared to 26,000 railcars during the corresponding week last year.

Specifically, carloads other than coal and coke fell 11.5% last week, but notably, so far in 2016, KSU has recorded the smallest fall in carloads among its Class I peers. KSU’s exposure to Mexico has helped it boost its volumes.

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Are coal carloads important to KSU?

In the week ending September 10, 2016, Kansas City’s coal and coke railcar units fell 16.5% YoY. In the same week, KSU hauled 5,000 units of coal and coke, as compared to ~6,000 units in the corresponding period of 2015.

Utility coal, other coal, and petroleum coke accounted for 7.4% of KSU’s total revenues in 2015, and utility coal and petroleum coke carloads represented ~11% of KSU’s total 2015 carloads. Although this figure may not look significant percentage-wise, it still holds importance, given the company’s relatively small scale of operations.

KSU moves coal originating from the Powder River Basin in Wyoming and coal mined in the Midwest US. Other coal producers operating in that region, such as Alpha Natural Resources (ANR) and Peabody Energy (BTU) (which recently declared bankruptcy), have also anticipated weak coal shipments in 2016. Notably, Black Hills Corp (BKH) operates in the same region but doesn’t produce coal commercially.

Investors in the transportation sector can consider investing in ETFs like the iShares US Industrials ETF (IYJ), which has 5.5% of its total portfolio in major US railroads.

Advancing and declining commodities

For the week ending September 10, 2016, the main commodity groups in the green zone were:

  • grain
  • food and kindred products
  • motor vehicles and equipment
  • waste and nonferrous scrap

The major commodities in the red zone were:

  • grain mill products
  • pulp, paper, and allied products
  • chemical and allied products
  • petroleum products

In the next part, we’ll take a look at Kansas City Southern’s intermodal traffic.

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