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Norfolk Southern’s Rail Traffic: Coal’s Fall Affects Other Railcars

Samuel Prince

Week Ended April 9: North American Rail Traffic, Intermodal Slump

(Continued from Prior Part)

Norfolk Southern’s rail traffic

Norfolk Southern Corporation (NSC) is a major freight rail carrier in the Eastern US. Norfolk Southern’s overall railcar units fell by 14.6% in the week ended April 9, 2016. Railcars totaled 63,000 units in the last week against 74,000 units in the corresponding week in 2015.

The company’s railcar units, except coal and coke, recorded a ~6% fall in the reported week of 2016 compared with the same week in 2015. This fall in NSC’s total railcar units, when compared with the fall in total US railcar units, was less than in the latest reported week of 2016.

Why do coal carloads matter for NSC?

Norfolk Southern’s (NSC) coal and coke railcar units declined by ~33% in the week ended April 9, 2016, compared with the corresponding period in 2015. Norfolk’s coal and coke traffic in the latest reported week of 2016 formed 25% of total railcar units against 32% in the previous year. Coal formed roughly 17% of the company’s 2015 revenues, coming down from 23% in 2009.

Environmental regulations and the recent shift from coal-fired electricity to natural gas–based electricity 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 such as Alliance Resource Partners (ARLP), Peabody Energy (BTU), and CONSOL Energy (CNX).

Investors interested in the transportation and logistics space can opt for the PowerShares Buyback Achievers ETF (PKW). This ETF invests in logistics and railroads.

Leaders and the laggards

In the week ended April 9, 2016, the advancing commodity groups were:

  • iron and steel scrap

  • metals and products

  • motor vehicles and equipment

  • stone, clay, and glass products

The major laggards in the same week were crushed stone, sand and gravel, grain mill products, petroleum products, grain, and non-metallic minerals.

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