Union Pacific’s carloads
In the western United States, Union Pacific (UNP) competes with BNSF Railway, which is owned by Berkshire Hathaway (BRK-B), In the week ended January 21, 2017, or the third week of the new year, UNP’s overall railcar volumes expanded 1.6% to ~92,000 units, compared with ~91,000 units in the corresponding week of 2016. Railcar volumes, excluding coal and coke, fell nearly 1% YoY (year-over-year), reaching ~67,000 units in the third week of 2017.
Why coal carloads matter
In the third week of 2017, UNP’s combined coal (ARLP) and coke carloads rose 8.9% on a YoY (year-over-year) basis. UNP’s coal revenue fell 6.0% in 4Q16. Coal’s (CNX) share of the company’s revenue was 14.4% in the same quarter, compared with 15.3% in the same period a year ago. UNP’s coal revenue depends on coal shipments originating in the Southern PRB (Powder River Basin).
According to the EIA (U.S. 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 was 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
Advancing commodities in the week ended January 21, 2017, included:
- iron and steel scrap
- metals and products
- pulp, paper, and allied products
- grain mill products
Major commodity groups in negative territory were as follows:
- metallic ores
- primary forest products
- petroleum products
- stone, clay, and glass products
- motor vehicles and equipment
In the next part, we’ll assess the position of UNP’s intermodal traffic in the week ended January 21, 2017.