Canadian Pacific’s carloads
Canadian Pacific (CP) registered an 8% fall in total railcars in the week ended November 5, 2016. The company hauled ~32,000 railcars in the same week against 34,500 railcars in the corresponding week in 2015.
CP’s railcars excluding coal fell 10.2% to settle at 25,300 units in the latest reported week of 2016. This metric compared with 28,000-plus units in the corresponding week in 2015. The percentage decline in CP’s carloads was in line with the fall reported by US railroads, but it was in contrast with the rise recorded by Canadian railroads.
For comparison with the previous week’s freight volume data, please read Gauging the Economy via Freight Traffic: Week Ended October 29.
Why coal carloads matter for CP
Canadian Pacific normally receives 70% of its revenues from Canada while 30% come from the US. CP’s coal carloads rose 5.8% to ~6, 500 railcars in the reported week of 2016, in contrast with the fall reported by Canadian National (CNI).
Coal accounted for 10.6% of revenues and 12.3% of carloads for CP in 3Q16. The company transports metallurgical coal meant for export through Metro Vancouver’s port. Its coal traffic in Canada begins primarily from Teck Resources’s (TCK) mines in southeastern British Columbia.
In the past year, coal’s production and demand is under pressure due to depressed prices, environmental concerns, and the shift of coal-fired power plants to natural gas–based electricity generation. Even the US steel producers’ capacity utilization has not seen marked improvement in the recent quarter. However, TCK has issued slightly high production guidance for 2016 compared with 2015.
If this goes according to plan, then we should see either more coal hauling by CP in 2016 or less contraction in the company’s coal volumes in the same year compared with its peers.
All of the US-based Class I railroads make up the portfolio holdings of the WisdomTree Earnings 500 Fund ETF (EPS).
The front-runners and the back-benchers
Volumes of commodity groups such as Canadian grain and potash were up in the week ended November 5, 2016. On the other hand, volumes of US grain, forest products, crude, metals and minerals, and automotive were down in the same week.
For more information on major US railroad stocks (UNP), please visit Market Realist’s Railroads page.
In the next part of this rail traffic series, we’ll look at Canadian Pacific’s intermodal traffic.