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Kansas City Southern’s Carloads: Unfazed by Coal Volume Slump

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Kansas City Southern’s carloads

In the week ended December 10, 2016, Kansas City Southern’s (KSU) total railcars rose 1.7% compared to the corresponding period in 2015. In the reported week of 2016, KSU hauled ~25,000 railcars against more than 24,000 railcars in the corresponding week last year. Carloads other than coal and coke rose marginally 3.4% in our reported week.

In the carloads data reported so far in 2016, KSU’s carloads have recorded the least fall among its Class I peers. KSU’s exposure to emerging Mexico helped raise the company’s volumes.

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Are coal carloads important to KSU?

In the week ended December 10, 2016, Kansas City’s coal and coke railcar units fell 4.0%. In the same week, KSU hauled 5,200 units of coal and coke against 5,400 units in the corresponding week last year.

You should note that utility coal, other coal, and petroleum coke accounted for 9.0% of KSU’s total revenues in 3Q16. Utility coal and petroleum coke carloads represented 12.5% of the total carloads in the same quarter. Even though the percentage may not seem significant, it’s important, given the company’s small scale of operations.

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

Transportation sector–specific investors can invest in the iShares US Industrials (IYJ). All major US railroads make up 5.6% of IYJ’s portfolio holdings.

Advancing and declining commodities

For the week ended December 10, 2016, the following main commodity groups were in the green zone:

  • grain
  • crushed stone, sand, and gravel
  • metals and products
  • motor vehicles and equipment
  • iron and steel scrap

Major commodities in the red zone that week included the following:

  • grain mill products
  • stone, clay, and glass products
  • waste and nonferrous scrap
  • petroleum products

For more information on US major railroad stocks, visit Market Realist’s railroads page.

To compare this week’s traffic data with the previous week, you can refer to Freight Rail Traffic for the Week Ended December 3.

In the next part, we’ll focus on KSU’s intermodal volume change in the reported week.

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