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These Volumes Just Pulled Down Union Pacific’s Carloads

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Union Pacific’s Carloads

Union Pacific (UNP) competes with BNSF Railway, which is owned by Berkshire Hathaway (BRK-B), in the Western United States. In the week ended January 7, 2017, or in the first week of the new year, UNP’s overall railcar volumes fell 7.6% to 80,000 units, as compared to ~87,000 units in the corresponding week of 2016. Railcar volumes excluding coal and coke fell 10.8% YoY (year-over-year), reaching ~57,000 units in the first week of 2017.

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Why coal carloads matter

In the first week of 2017, UNP’s combined coal (ARLP) and coke carloads rose marginally 1.5% on a YoY (year-over-year) basis. UNP’s coal revenue fell ~20.0% in 3Q16. Coal’s (CNX) share of the company’s revenue was almost 15.0% in the same quarter, which represents a fall of 17.2% from 3Q15. UNP’s coal revenue depend on coal shipments originating in the Southern PRB (Powder River Basin).

According to the EIA (US Energy Information Administration), PRB production has fallen over the past few years, mainly due to the 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), resulting from reduced natural gas prices, has been one of the main factors affecting coal output recently.

Advancing and declining commodity groups

The commodities in the green zone in the week ended January 7, 2017, included grain. Major commodity groups in the negative territory were as follows:

  • metallic ores
  • petroleum products
  • motor vehicles
  • crushed stone, gravel, and sand

In the next part, we’ll assess the position of UNP’s intermodal traffic in the week ended January 7, 2017.

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