Canadian Pacific’s carloads
Canadian Pacific (CP) registered a fall of 2.3% in total railcars in the week ended October 8, 2016. The company hauled 32,000 railcars in the same week, compared to ~33,000 railcars in the corresponding week last year.
Even CP’s railcars excluding coal fell 4.5% to settle near 26,000 units in the latest reported week of 2016, compared to ~27,000 units in the corresponding week of 2015. CP’s carloads reported a fall in sharp contrast to the 6.3% rise reported by rival Canadian National (CNI) in the week ended October 8, 2016.
Canadian Pacific received 70% of its revenue from Canada and 30% from the United States in 2015. CP’s coal carloads rose 8%, in contrast to the sharp fall of 23.5% reported by rival Canadian National in the week ended October 8, 2016.
Why coal carloads matter for CP
Coal accounted for 10% of CP’s revenue and 12.3% of its carloads in 2015. CP mostly transports metallurgical coal meant for export through Metro Vancouver’s port. Its coal traffic in Canada begins primarily at Teck Resources’ (TCK) mines in southeast British Columbia.
In the last year, coal’s production and demand has been under pressure due to depressed prices, environmental concerns, and a shift from coal-fired power plants to natural gas–based electricity generation. Even US steel producers’ capacity utilizations haven’t seen marked improvements in the recent quarter.
However, TCK has issued slightly high production guidance for 2016 compared to last year. If this goes according to plan, we should see either more coal being hauled by CP in 2016 or less contraction in the company’s coal volumes compared to those of its peers.
All US-originated Class I railroads make up the portfolio holdings of the WisdomTree Earnings 500 ETF (EPS).
Frontrunners and backbenchers
Commodity groups such as Canadian and US grain, forest products, and chemicals and plastics rose in the week ended October 8, 2016. On the other hand, crude oil, metals and minerals, and automotive fell in the same week.
In the next article of the series, we’ll discuss Canadian Pacific’s intermodal traffic.