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Researched by Industrial Info Resources (Sugar Land, Texas)--The latest statistics from the Association of American Railroads (AAR) show some "troubling" and "uncertain" portents for this year when it comes to falling coal and crude-by-rail shipments--and more positive signs for intermodal traffic.
The rail trade group reported Wednesday that for the first nine weeks of this year, U.S. railroads reported cumulative volume of 2,194,100 carloads, down 12.9% from the same point last year; and 2,353,933 intermodal units, up 7.6% from last year. Cumulative coal carloads totaled 673,303, down more than 30% from the same period last year. Cumulative carloads of petroleum and petroleum products totaled 105,465, down 20.5%.
A week earlier, AAR Senior Vice President John Gray said, "The economy is still giving off a lot of mixed signals, and rail traffic is too. Coal carloads remain very troubling, intermodal is doing well, and the other rail traffic categories are somewhere in between." Until international energy markets stabilize, "and until it becomes clear that the disruptions abroad aren't spreading into the domestic economy, rail traffic will remain in an uncertain environment."
The falling shipments of oil and coal are a continuation from last year. For all of 2015, 410,249 crude oil carloads were originated in the U.S., the AAR reported, down 16.8% from 2014. For just fourth-quarter 2015, crude oil carloads were down 35.2% from the same period of 2014.
Several U.S. railways have reported falling profits for the just-ended quarter amid sharp drops in coal and oil shipments. For more information, see January 28, 2016, article - Norfolk Southern Railway Announces Cost Cuts as Profits Fall; Canadian Pacific Sees Earnings Gain, January 22, 2016, article - Canadian Pacific, Union Pacific Railways Hammered by Fall in Fourth-Quarter 2015 Earnings, to Cut 2016 Capex and January 14, 2016, article - CSX Railway Reports 5% Drop in Fourth-Quarter 2015 Earnings, Plans for $2.4 Billion Capex for 2016.
From 2011 through 2015, CSX Corporation (NYSE:CSX) (Jacksonville, Florida) has seen a $1.4 billion coal revenue loss as a result of the plummeting market, said Chief Financial Officer Frank Lonegro on Wednesday at the J.P. Morgan Aviation, Transportation and Industrials Conference. The main culprit was the proliferation of inexpensive shale-derived natural gas, which has caused many power plants to switch to natural gas from coal as their energy source, he indicated, adding "It really is the quintessential supply side shock."
He said the railway was largely able to weather the decline in coal from 2011 to 2015 as a result of the improving economy during that time. "You saw this through crude by rail, frac sand [shipments] [and] strengthening of many of the merchandise markets," he said. That really helped us replace the value we lost from coal."
However, beginning in the second half of 2015, "we began to see those macro-fundamentals erode," Lonegro said, largely because of the strengthening of the U.S. dollar (which impedes U.S. exports), and global oversupply of many commodities such as oil and grain. The railway saw "bright spots" in automotive products, core chemicals and housing materials, he said, "but the overall merchandise portfolio lost ground in 2015."
Lonegro said he expects coal shipments to continue to decline for the foreseeable future. As a result, CSX has been moving its focus to merchandise and intermodal traffic, which in turn has affected its capital projects slate. The railway's investment in terminals and intermodal volume has doubled in the past decade, he said.
Lonegro noted the ongoing construction of an intermodal terminal in Pennsylvania. Located in Ambridge, the brownfield project has a total investment value of $65 million. The terminal will provide western Pennsylvania shippers direct Intermodal access, helping to shift long-haul freight from highway to rail. Completion is expected in early 2017.
He also referred to the railway's plans to build an intermodal terminal in Johnston County, North Carolina. When it opens in 2019, the terminal "will allow us to enter the mid-Atlantic area in a significant way, with 60% initial volumes to be local traffic..."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
The rail trade group reported Wednesday that for the first nine weeks of this year, U.S. railroads reported cumulative volume of 2,194,100 carloads, down 12.9% from the same point last year; and 2,353,933 intermodal units, up 7.6% from last year. Cumulative coal carloads totaled 673,303, down more than 30% from the same period last year. Cumulative carloads of petroleum and petroleum products totaled 105,465, down 20.5%.
A week earlier, AAR Senior Vice President John Gray said, "The economy is still giving off a lot of mixed signals, and rail traffic is too. Coal carloads remain very troubling, intermodal is doing well, and the other rail traffic categories are somewhere in between." Until international energy markets stabilize, "and until it becomes clear that the disruptions abroad aren't spreading into the domestic economy, rail traffic will remain in an uncertain environment."
The falling shipments of oil and coal are a continuation from last year. For all of 2015, 410,249 crude oil carloads were originated in the U.S., the AAR reported, down 16.8% from 2014. For just fourth-quarter 2015, crude oil carloads were down 35.2% from the same period of 2014.
Several U.S. railways have reported falling profits for the just-ended quarter amid sharp drops in coal and oil shipments. For more information, see January 28, 2016, article - Norfolk Southern Railway Announces Cost Cuts as Profits Fall; Canadian Pacific Sees Earnings Gain, January 22, 2016, article - Canadian Pacific, Union Pacific Railways Hammered by Fall in Fourth-Quarter 2015 Earnings, to Cut 2016 Capex and January 14, 2016, article - CSX Railway Reports 5% Drop in Fourth-Quarter 2015 Earnings, Plans for $2.4 Billion Capex for 2016.
From 2011 through 2015, CSX Corporation (NYSE:CSX) (Jacksonville, Florida) has seen a $1.4 billion coal revenue loss as a result of the plummeting market, said Chief Financial Officer Frank Lonegro on Wednesday at the J.P. Morgan Aviation, Transportation and Industrials Conference. The main culprit was the proliferation of inexpensive shale-derived natural gas, which has caused many power plants to switch to natural gas from coal as their energy source, he indicated, adding "It really is the quintessential supply side shock."
He said the railway was largely able to weather the decline in coal from 2011 to 2015 as a result of the improving economy during that time. "You saw this through crude by rail, frac sand [shipments] [and] strengthening of many of the merchandise markets," he said. That really helped us replace the value we lost from coal."
However, beginning in the second half of 2015, "we began to see those macro-fundamentals erode," Lonegro said, largely because of the strengthening of the U.S. dollar (which impedes U.S. exports), and global oversupply of many commodities such as oil and grain. The railway saw "bright spots" in automotive products, core chemicals and housing materials, he said, "but the overall merchandise portfolio lost ground in 2015."
Lonegro said he expects coal shipments to continue to decline for the foreseeable future. As a result, CSX has been moving its focus to merchandise and intermodal traffic, which in turn has affected its capital projects slate. The railway's investment in terminals and intermodal volume has doubled in the past decade, he said.
Lonegro noted the ongoing construction of an intermodal terminal in Pennsylvania. Located in Ambridge, the brownfield project has a total investment value of $65 million. The terminal will provide western Pennsylvania shippers direct Intermodal access, helping to shift long-haul freight from highway to rail. Completion is expected in early 2017.
He also referred to the railway's plans to build an intermodal terminal in Johnston County, North Carolina. When it opens in 2019, the terminal "will allow us to enter the mid-Atlantic area in a significant way, with 60% initial volumes to be local traffic..."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
