uploads///KSU Carloads

Which Commodity Groups Dragged on KSU’s Carloads?

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Oct. 10 2016, Updated 10:04 a.m. ET

Kansas City Southern’s carloads

In the week ended October 1, 2016, Kansas City Southern’s (KSU) total railcars fell 6.6% compared to the corresponding period in 2015. In the last-reported week, KSU hauled ~25,000 railcars, compared to nearly 27,000 railcars during the same period in 2015.

Even KSU’s carloads other than coal and coke fell 6.6% in the last-reported week of 2016. Note that in the data reported so far in 2016, KSU’s carloads have recorded the lowest fall among the company’s Class I peers. KSU’s exposure in emerging market Mexico has helped it to push its volumes up.

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Are coal carloads important to KSU?

In the week ended October 1, 2016, Kansas City’s coal and coke railcar units fell 6.7%. In the same week, KSU hauled 5,000 units of coal and coke, compared to over 5,000 units hauled in the corresponding week of 2015.

Note that utility coal, other coal, and petroleum coke accounted for 7.4% of KSU’s total revenue in 2015. Utility coal and petroleum coke carloads represented ~11% of the company’s total 2015 carloads. Although this amount may not seem significant, it holds importance given the company’s relatively small scale of operations.

The company moves coal originating from the Powder River Basin in Wyoming and coal mined in the US Midwest. The coal producers operating in the region, including Alpha Natural Resources (ANR) and Peabody Energy (BTU), have anticipated weak coal shipments in 2016. Black Hills (BKH) operates in the same region, but it doesn’t produce coal commercially.

Transportation sector–specific investors can invest in the iShares US Industrials ETF (IYJ). All major US railroads make up 5.5% of IYJ’s portfolio holdings.

Rising and falling commodities

For the week ended October 1, 2016, the main commodity groups in the green zone were as follows:

  • food and kindred products
  • motor vehicles and equipment
  • stone, clay, and glass products

The major commodities in the red zone were as follows:

  • grain
  • crushed stone, sand, and gravel
  • grain mill products
  • pulp, paper, and allied products
  • petroleum products

In the coming article, we’ll take a look at the intermodal traffic of Kansas City Southern.

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