CSX’s Railcars Slide in Line with Rival Norfolk Southern’s
North American Rail Traffic Saw Double-Digit Slump
CSX’s railcars
CSX (CSX) is a major operator in the Eastern US. CSX and Norfolk Southern (NSC) virtually run a duopoly in that region. In the week ended May 7, 2016, CSX’s railcars excluding coal and coke fell by 8.1%, whereas NSC registered a 7.5% fall for the same category. Overall, CSX hauled 70,000 plus railcars in the reported week of 2016 against 81,000 railcars in the week ended May 9, 2015. CSX’s 13.2% fall in total railcars was on par with the 15% fall in US railcar traffic in the reported week of 2016.
Why coal carloads matter
CSX’s coal plus coke railcars went down by 28% in the week ended May 7, 2016, almost equal to rival NSC’s decline in coal traffic. Coal accounted for 16% of CSX’s total volumes and 19% of its total revenues in 2015.
According to the US Energy Information Administration’s March 2016 press release, the Appalachia region’s coal output is expected to fall by 9% in 2016. However, the agency expects total coal production to increase by 2% and stabilize in 2017. CSX mainly connects coal mining operations in the Appalachian mountain region.
The Eastern railroads have cited electricity generation plants’ shift from coal to natural gas as one of the reasons for the fall in utility coal transportation. The coal tsunami has affected major coal producers in the US like Alliance Resource Partners (ARLP), CONSOL Energy (CNX), and Peabody Energy (BTU). Due to the sharp decline coal prices, Peabody filed for Chapter 11 bankruptcy protection in the US on April 13.
Investors interested in dividend ETFs can opt for the Vanguard Dividend Appreciation ETF (VIG). All US Class I railroads are part of VIG’s portfolio holdings.
Winning and losing commodity groups
Commodities that posted major gains for CSX in the week ended May 7, 2016, were:
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food products
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lumber and wood products
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chemicals
The main bear commodity groups were farm products excluding grain, petroleum and petroleum products, metallic ores, primary metal products, and pulp and paper products.
For more information on the previous week’s rail traffic, visit Market Realist’s Week Ended April 30: North American Rail Traffic Falls, Mexico Up. The Class I railroads’ intermodal businesses have had a bumpy ride in the last few quarters. We’ll go through CSX’s intermodal traffic in the next article.
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