Coal and Coke Railcars Take Down CSX’s Rail Traffic

Week Ending April 23: North American Rail Traffic Fell

(Continued from Prior Part)

CSX’s rail traffic

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 April 23, 2016, CSX’s railcars excluding coal and coke fell by 7%. Overall, the company hauled ~70,000 railcars in the week against 81,200 railcars in the week ended April 25, 2015. CSX’s 14% fall in total railcars was lower than the 17% fall in US railcar traffic for the week.

Why coal carloads matter

CSX’s coal plus coke railcars went down by 35% in the week ended April 23, 2016, to 14,000 plus units compared to 22,000 railcars in the corresponding period in 2015. This fall was almost on par with rival Norfolk Southern’s fall in coal and coke railcars in the reported week. 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.

Eastern railroads have cited electricity generation plants’ shift from coal to natural gas (UNG) 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 in coal prices, Peabody filed for Chapter 11 bankruptcy protection in the US on April 13.

Rising and falling commodity groups

Commodities that posted major gains for CSX in the week ended April 23, 2016, were:

• chemicals

• stone, clay, and glass products

• waste and non-ferrous scrap

• motor vehicles and parts

The main bearish commodity groups were farm products excluding grain, petroleum and petroleum products, metallic ores and primary metal products.

For information on the previous week’s rail traffic, visit Market Realist’s Week Ended April 16: US, Canadian Railcars and Intermodals Slumped.

All Class I railroads have had a bumpy ride with t heir intermodal businesses in the last few quarters. We’ll look at CSX’s intermodal traffic in the next article.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Mexican Rail Traffic Fell Less than US and Canadian Rail Traffic

• Part 2 - Norfolk Southern’s Railcars Slid in Line with Other US Railroads

• Part 3 - Norfolk Southern’s Intermodal: Containers Go Up as Trailers Slump