Norfolk Southern: Why Freight Volumes Rose in Week 13 of 2017



Weekly carloads for Norfolk Southern

Norfolk Southern (NSC) and CSX (CSX) operate in a duopolistic environment in the Eastern US. In the week ended April 1, 2017, NSC’s overall railcar volumes rose 12%. The company saw more than 72,000 railcars in the same week.

There was a 3.2% increase in carloads other than coal and coke during the week. Investors should note that in the 13th week of 2017, the rise in Norfolk Southern’s freight volumes was ahead of the rise reported by US railroad companies overall.

If you want to compare this week’s freight volume data with the previous week’s data, please check out Market Realist’s Week 12: North American Freight Rail Traffic on the Fast Track.

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Why coal matters for NSC

Since the beginning of 2017, higher coal volumes boosted NSC’s overall carloads. NSC’s coal (ARLP) carloads rose 41% YoY in the week ended April 1, 2017. This was in sharp contrast to CSX’s fall of nearly 13% in the same category.

Coal (CNX) made up ~15% of NSC’s 2016 revenues, falling from 23% in 2009. However, recent trends in coal prices have rekindled coal producers’ hopes. Norfolk Southern expects to handle 17 million–19 million tons of utility coal per quarter in 2017.

Norfolk Southern 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 could 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 ETF (IYJ). Major US railroad companies (UNP) make up 6.2% of the portfolio holdings of IYJ.

Leader and laggard commodity groups 

In the week ended April 1, 2017, the rising commodity groups were as follows:

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

The major falling commodity groups in the same week were:

  • chemicals
  • petroleum products
  • grain
  • 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 1, 2017.


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