Home 5 Supplements 5 Us rail carload traffic continues to contract on yoy basis – fitch – Anticancer Supplement Manufacter

Us rail carload traffic continues to contract on yoy basis – fitch – Anticancer Supplement Manufacter

By wu chao

Fitch Rating Agency has announced that US rail carload trafficcontinues to contract on a year over year basis, driven in largepart by the ongoing decline in coal demand from utility customers. Fitch Ratings views weak year to date rail volume trends as areflection of fundamental shifts in demand patterns for keyindustrial commodities as domestic production of unconventional oiland gas resources continues to grow. Rail carload traffic data forApril 2012 provided by the Association of American Railroadscontinues to show significant declines in demand for coal, whichhas historically driven 20% or more of total US rail freightvolumes. For the month of April 2012, coal carloads fell by 16.6% versusApril 2011, the largest year over year decline for coal shipmentson record. Year to date coal carloads are down 11.3%.

The biggestfactor driving weak domestic demand for coal continues to be thedeclining price of natural gas produced in the US and the ongoingshift away from coal as a feedstock for electrical utilities. Inaddition, warm winter weather has contributed to weak coalconsumption as electricity demand has slumped in 2012. As naturalgas prices fell below USD 2 per million British thermal unitsearlier in the year, the economics of gas substitution for PowderRiver Basin coal became very attractive. It remains unclear whetheror not a secular shift away from coal is underway, given thepotential for gas prices to rebound if supply growth slows. Whileoverall rail carloads shipped declined by 5.5% last month,continuing a weak first quarter trend, virtually all of theweakness was explained by declines in shipments of two commoditygroups coal and grain.

Grain carloads fell by 17.2% YoY in April2012. Fitch said that “We see underlying demand patterns for other keyindustrial products as more resilient early in the year, belyingthe overall rail volume contraction. In particular, shipments ofautos and auto parts remain quite strong, with April freightvolumes up by 21.1%. This mirrors the broader strength in USconsumer demand for new vehicles that has been evident since thestart of the year.

Moreover, intermodal shipments have shown morestrength in 2012, growing by 2.8% for the year through April 28th2012. Intermodal traffic, including both containers and trailerscarried on trains, often serves as a better proxy for consumerdemand than shipments of bulk commodities. The shift away from coaltoward natural gas as the preferred source of energy for powerplants has also been evident in the sharp increases in rail volumesfor commodities linked to rapidly growing production of shale oiland gas in newly developed North American shale plays. Rail volumesfor petroleum products grew by 43.1% in April 2012, while shipmentsof crushed stone, gravel, and sand grew by 9.3%. Increased carloadvolumes for the latter category reflect the booming demand forfracking sand used in unconventional energy exploration andproduction.

The data points to a mixed picture for industrialdemand this year as traditional powerhouse commodities like coalsee their share of rail traffic fall relative to other categories.Careful management of capacity, cost control, and solid pricingpower have allowed major railroads to weather the 2012 carloadweakness effectively. Still, in light of the unevenness of the USrecovery, the outlook for rail volume growth over the remainder ofthe year appears relatively weak.” Source – Fitch Ratings.

Senior Fitness Editor

Senior Fitness Editor

Share this:

Subscribe to Senior Fitness Update

  • This field is for validation purposes and should be left unchanged.