Norfolk Southern’s Carloads Fell in Line with Overall US Rail Traffic
North American Rail Traffic Saw Double-Digit Slump
Norfolk Southern’s carloads
Norfolk Southern (NSC) is a major freight rail carrier in the Eastern US. NSC’s overall railcar units went down by 13.3% in the week ended May 7, 2016. The total railcars were just above 63,000 units compared to 73,000 units in the corresponding week of 2015. The company’s railcars excluding coal and coke railcars saw a 7.5% decline in the reported week of 2016 compared with last year. The fall in NSC’s total railcars was in line with the fall in total US railcars in the latest reported week of 2016.
Why coal carloads matter for NSC
NSC’s coal and coke traffic fell by 27.4% in the week ended May 7, 2016, on a year-over-year basis. Norfolk’s coal and coke traffic in the latest reported week of 2016 formed 24% of total railcars against 29% in the previous year. Coal formed roughly 17% of the company’s 2015 revenues, down from 23% in 2009.
Environmental regulations and the shift from coal-fired electricity to natural-gas-based (UNG) electricity in the recent past have impacted coal production across the US. The slowdown in US steel production has negatively impacted the demand for metallurgical coal. Lower crude oil prices have affected coal producers like Alliance Resource Partners (ARLP), Peabody Energy (BTU), and CONSOL Energy (CNX). The sharp decline in coal price led BTU to file chapter 11 bankruptcy protection on April 13.
Investors can consider the iShares Global Industrials ETF (EXI) for exposure to US railroads. All the US originated Class I railroads are included in the portfolio holdings of EXI.
Leaders and laggards
In the week ended May 7, 2016, the advancing commodity groups were:
lumber and wood products
metallic ores
metals and products
waste and scrap material
The major laggards in the week were chemicals, pulp, paper and allied products, grain, non-metallic minerals, and petroleum products. In the next part, we’ll discuss the state of NSC’s intermodal traffic for the week ended May 7, 2016.
For information on the previous week’s rail traffic, visit Market Realist’s Week Ended April 30: North American Rail Traffic Falls, Mexico Up.
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