Kansas City Southern’s Intermodal Traffic Rose
North American Rail Traffic Saw Double-Digit Slump
Kansas City Southern’s intermodal traffic
Kansas City Southern (KSU) reported a small rise in overall intermodal traffic in the week ended May 7, 2016. Container traffic went up by 1% in the reported week of 2016. The company witnessed 18,800 containers moving this week against 18,600 in the corresponding week of 2015.
In the week ended May 7, 2016, KSU moved 223 trailers against 327 trailers on a year-over-year basis. This railroad operates in the US and Mexico. The rise in KSU’s intermodal traffic is in line with the rise in Mexican intermodal traffic, but it contrasts with the US and Canadian railroad intermodal traffic slump.
Why is intermodal important to KSU?
KSU operates in Mexico through Kansas City Southern de Mexico (or KCSM). In fiscal 2015, nearly 48% of KSU’s revenues came from Mexico. Intermodal accounted for ~16% of the company’s total revenues in 2015. In Mexico, the company has the sole concession to serve the Port of Lázaro Cárdenas, an important port in Mexico.
Apart from seasonality, intermodal traffic is impacted by exclusive access to ports, highway to rail conversions, and levels of retail sales. KSU may witness some increased intermodal volumes in the second half of 2016. This is mainly due to an upcoming APMT container terminal at Lázaro Cárdenas. This terminal is expected to be operational in the second half of the current year.
KSU’s US intermodal business competes with major Western carriers like BNSF Railway (BRK-B) and Union Pacific (UNP). In Mexico, KCSM’s intermodal competes with Landstar System (LSTR), Trinity Logistics, and ByExpress Logistics.
The transportation and logistics sector forms part of the industrial sector. The ProShares Ultra S&P 500 ETF (SSO) invests ~7.6% in the industrial sector.
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.
In the next article, we’ll go through the traffic of Canada’s largest freight rail, Canadian National Railway (CNI).
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