uploads///UNP Carloads

Union Pacific’s Carloads Are Facing These Growth Limits

By

Feb. 21 2017, Updated 8:35 p.m. ET

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 February 11, 2017, UNP’s overall railcar volumes grew 1.4% to over 93,000 units, as compared to the volumes reported in the corresponding week of 2016.

Railcar volumes excluding coal and coke fell nearly 5% YoY (year-over-year), reaching ~67,000 units in the sixth week of 2017, as compared to ~71,000 units in the comparable week of 2016.

Article continues below advertisement

Why coal carloads matter

In the sixth week of 2017, UNP’s combined coal (ARLP) and coke carloads rose 22% on a YoY (year-over-year) basis. Although UNP’s coal revenue fell 6.0% in 4Q16, fiscal 2017 brings some hope for the company, given the recent upward trend in coal prices.

Coal’s (CNX) share of the company’s revenue was 14.4% in the same quarter, as compared to 15.3% in the same period one year ago. UNP’s coal revenue depends 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 was expected to fall significantly in 2016 for the first time since 1998. Competition from natural gas (UGAZ), primarily resulting from reduced natural gas prices, has been one of the main factors affecting coal output recently.

Advancing and declining commodity groups

The advancing commodities in the week ended February 11, 2017, included:

  • grain
  • pulp, paper, and allied products
  • metals and products
  • stone, clay, and glass products

The major commodity groups in negative territory were as follows:

  • metallic ores
  • petroleum products
  • iron and steel scrap
  • waste and nonferrous scrap
  • primary forest products

In the next part, we’ll assess the position of UNP’s intermodal traffic in the week ended February 11, 2017.

Advertisement

More From Market Realist