Union Pacific’s carloads
Union Pacific (UNP) competes with Berkshire Hathaway’s BNSF Railway (BRK-B) in the US West. In the week ended October 22, UNP’s overall railcars fell 7.8% to ~95,000 units from over 103,000 units in the corresponding week of 2015.
Railcars excluding coal and coke fell 3.4% to 71,000 units in the latest reported week of 2016. The percentage decline in UNP’s carloads in the week ended October 22, 2016, was almost equal to the fall reported by its rival BNSF.
Why coal carloads matter
UNP’s combined coal (ARLP) and coke carloads fell 19% in the week ending October 22, 2016, on a YoY (year-over-year) basis. Notably, UNP’s coal revenues fell ~20% in 3Q16. Importantly, coal’s (CNX) share of the company’s revenues was almost 15% in the same quarter, down from 17.2% in 3Q15. UNP’s coal revenues depend on upon coal shipments originating in the Southern Powder River Basin, or PRB.
According to the EIA (US Energy Information Administration), PRB production has fallen during the past few years, mainly due to recession and competition from natural gas. PRB coal output is expected to fall significantly in 2016, for the first time since 1998. Competition from natural gas (UGAZ) due to low natural gas prices have been one of the main factors affecting coal output recently.
Advancing and declining commodity groups
Commodities in the green zone for the week ended October 22, 2016, include:
- crushed stone, gravel, and sand
- iron and steel scrap
- primary forest products
The major commodity groups in the negative territory were metallic ores, nonmetallic minerals, petroleum products, metals and products, and motor vehicles and equipment.
In the next part, we’ll assess the position of UNP’s intermodal traffic in the week ended October 22, 2016.