How Badly Did Railroad Traffic Derail as of March 12?
Railcar units
BNSF Railway (BRK-B) operates in the western United States and competes with Union Pacific (UNP). For the week ended March 12, 2016, BNSF reported a fall of ~17% in total railcar units. Even carloads other than coal plus coke fell marginally by ~2% to 57,000 units in the week ended March 12, 2016, compared to 58,000 units in the comparable week of 2015.
In comparison with the fall in total US weekly carloads at 12.8%, BNSF’s carloads recorded a higher fall in the week ended March 12, 2016.
Why coal carloads matter
BNSF’s coal carloads including coke fell by a staggering 36% in the week ended March 12, 2016, compared to the week ended March 14, 2015. The company hauled 31,000 units of coke and coal in the week ended March 12, 2016, against 47,000 units in the same period in 2015. Coal transportation contributed nearly 22% of freight revenues for 2015.
Note that 90% of all BNSF’s coal tons originate from the Powder River Basin in Wyoming and Montana. The major coal producers operating in that area include Alpha Natural Resources (ANR), Black Hills (BKH), and Peabody Energy (BTU).
BKH doesn’t produce coal commercially. Other coal producers have lowered their 2016 coal shipment guidances from 2015 levels. Overall, environmental concerns and competition from natural gas (UGAZ) have hampered incremental coal shipment prospects for coal producers in 2016.
Progressing and regressing commodities
The main front-runner commodities for the week ended March 12, 2016, were as follows:
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chemicals
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motor vehicles
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food
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pulp and paper
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lumber and wood
Those that witnessed backward movement included grain, metallic ores, metals, sand and gravels, and forest products.
In the next part of the series, we’ll track the intermodal traffic of BNSF Railway.
Browse this series on Market Realist: