Union Pacific: Commodities that Led the Volume Rise in Week 16



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 April 22, 2017, UNP’s overall railcar volumes rose 9.8% YoY (year-over-year) to more than 91,000 units. Its railcar volumes excluding coal and coke rose 4% YoY to almost 70,000 units, compared to 67,000 units in the same week of 2016.

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Why coal carloads matter

In the 16th week of 2017, Union Pacific’s combined coal (ARLP) and coke carloads rose an impressive 34.0% YoY. In 4Q16, UNP witnessed a 6.0% fall in coal revenue. However, 2017 has given Union Pacific as well as the entire sector some hope, given the upward momentum in coal prices. As a result, many research companies have started factoring coal growth into railroad companies’ price targets.

Coal’s (CNX) share of UNP’s total revenue totaled 14.4% in 4Q16, compared to 15.3% in the same period in 2016. UNP receives much of its coal revenue from 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. In 2016, PRB coal output fell significantly 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.

Rising and falling commodity groups

The rising commodities in the week ended April 22, 2017, included the following:

  • iron and steel scrap
  • crushed stone, gravel, and sand
  • stone, clay, and glass products
  • grain
  • primary forest products

The commodity groups that lagged behind in the week included the following:

  • metallic ores
  • petroleum products
  • metals and products
  • nonmetallic minerals
  • grain mill products

In the next article, we’ll review Union Pacific’s intermodal traffic in Week 16.


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