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Norfolk Southern: What Drove Freight Volumes in Week 14?

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Apr. 18 2017, Published 6:15 p.m. ET

Norfolk Southern’s carloads

Norfolk Southern (NSC) and CSX (CSX) run a virtual duopoly in the Eastern United States. In the week ended April 8, 2017, NSC’s overall railcar volumes rose 9.3%. It had more than 68,800 railcars that week.

There was a 4.1% increase in carloads other than coal and coke in the week. It’s worth noting that the rise in carloads was on par with the rise reported by US railroads overall. Since the beginning of 2017, higher coal volumes have boosted NSC’s overall carloads. Its coal (ARLP) carloads rose 25.0% YoY in the week ended April 8, 2017.

If you want to compare this week’s freight volume data with the previous week’s data, check out Market Realist’s Week 13: US Freight Rail Volumes on a Growth Trajectory.

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Why coal matters for NSC

Coal (CNX) made up ~15.0% of NSC’s 2016 revenue, falling from 23.0% in 2009. However, recent trends in coal prices have rekindled coal producers’ hopes. Norfolk Southern expects to handle 17.0 million–19.0 million tons of utility coal per quarter in 2017.

NSC also anticipates handling 3.5 million–4.5 million tons of export coal in 2017 on a quarterly basis. The tightening of the international coal supply and better seaborne pricing will most likely boost export coal tonnage over the next four quarters.

If you want exposure to the transportation and logistics sector, you can invest in the iShares US Industrials (IYJ). Major US railroad companies (UNP) make up 6.2% of the portfolio holdings of IYJ.

Leaders and laggards

In the week ended April 8, 2017, the rising commodity groups were as follows:

  • crushed stone, sand, and gravel
  • motor vehicle and equipment
  • grain mill products
  • metals and products
  • grain

The major falling commodities in the same week were the following:

  • chemicals
  • petroleum products
  • iron and steel scrap
  • pulp, paper, and allied products
  • primary forest products

Continue to the next part of this series for a look at NSC’s intermodal traffic for the week ended April 8, 2017.

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