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How Canadian Pacific’s Carloads Compared to the Industry’s

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Canadian Pacific’s carloads

Canadian Pacific (CP) registered a fall of 5.5% in total railcars in the week ended October 29, 2016. The company hauled over 32,000 railcars in the week, compared to ~34,000 railcars in the corresponding week of 2015. Even CP’s railcars excluding coal fell 5.4% to settle near 26,000 units, compared to over 27,000 units in the corresponding week of 2015.

The fall in CP’s carloads was in line with the total fall reported by US railroad companies, but it stood in contrast to the total rise recorded by Canadian railroad companies.

Canadian Pacific normally receives 70% of its revenue from Canada and 30% from the United States. CP’s coal carloads fell 5.8% to ~6,500 railcars in the most recent week. This fall was lower than the fall reported by Canadian National Railway (CNI) in the same category in the week.

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Why coal carloads matter for CP

Coal accounted for 10.6% of CP’s revenue and 12.3% of its carloads in 3Q16. The company mostly transports metallurgical coal meant for export through Metro Vancouver’s port. Its coal traffic in Canada begins primarily in 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 coal-fired power plants’ shifts to natural gas–based electricity generation. Even US steel producers’ capacity utilizations didn’t see marked improvement in 3Q16. However, TCK has issued slightly high production guidance for 2016 compared to 2015.

If all 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 in the year compared to its peers (UNP).

All US-originated Class I railroad companies are included in the portfolio holdings of the WisdomTree Earnings 500 ETF (EPS).

Frontrunners and backbenchers

Commodity groups such as Canadian grain and potash rose in terms of volume in the week ended October 29, 2016. On the other hand, US grain, forest products, crude, metals and minerals, and automotive volumes fell in the week.

In the last part of this rail traffic series, we’ll take a look at Canadian Pacific’s intermodal traffic.

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