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Behind the Rise in Norfolk Southern’s Carloads in Week 19

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Norfolk Southern’s carloads

Norfolk Southern (NSC) and CSX Corporation (CSX) run a virtual duopoly in the Eastern United States. In the week ended May 13, 2017, Norfolk Southern’s overall railcar volumes rose 11% to more than 71,000 railcars.

While there was no variance in carloads other than coal and coke, US railroad companies reported an overall rise in their carloads. Since the beginning of 2017, higher coal volumes have boosted Norfolk’s overall number of carloads. Its coal (ARLP) carloads rose 46.5% YoY (year-over-year) in the week ended May 13, 2017.

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Why coal matters for Norfolk

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

Norfolk also expects to handle 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.

For exposure to the transportation and logistics sector, you could invest in the iShares US Industrials ETF (IYJ). Major US railroad companies (UNP) make up 6.2% of IYJ’s portfolio holdings.

Leaders and laggards

In the week ended May 13, 2017, the rising commodity groups were as follows:

  • nonmetallic minerals
  • motor vehicles and equipment
  • iron and steel scrap
  • metals and products
  • crushed stone, sand, and gravel

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

  • chemicals
  • motor vehicles and equipment
  • petroleum products
  • pulp, paper, and allied products
  • grain

Continue to the next part of this series for a look at Norfolk’s intermodal traffic for the week ended May 13, 2017.

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