The only way is UP

AN EXECUTIVE for one of the nation’s largest coal rail shippers reportedly feels the coal shipment slump has hit bottom and says, all things considered, its volumes during the upcoming peak season may top figures from last year.
The only way is UP The only way is UP The only way is UP The only way is UP The only way is UP

Image courtesy of Union Pacific

Donna Schmidt

Union Pacific chief executive Jim Koraleski told Reuters in an interview at the New York Stock Exchange that, despite slow economic activity, it was seeing stability.

“Right now, there’s really not anything that we could put our finger on to tell you that the economy is getting softer,” he said.

“We see a slow, continual growth pattern.”

UP, along with many other industry suppliers, servicers and operators, has felt the pain of fallen coal volumes stemming from an unusually mild winter as well as natural gas prices at the lowest they have been in a decade.

The market factors have been especially concerning for railroads that depend on coal as a large part of their revenue stream, such as UP, Norfolk Southern and CSX.

In the case of Union Pacific, coal represents about one-fifth of its business, followed by auto and lumber freight, crude oil and food products. It was the other segments that offset its loss in coal during the second quarter.

Koraleski, who was at the NYSE to ring the closing bell on Monday as part of Union Pacific's 150th anniversary, said international business had also been steady.

About 40% of UP’s business commences or ends outside of the US.

“We haven't seen a lot of impact from the European discussions and disruptions that have been going on,” Koraleski said.

He confirmed the company’s coal volumes had begun to turn upward.

“Coal looks like it has hit the bottom and is starting to come back up,” he said.

“We're certainly encouraged by the temperatures outside.”

Much of the US is still suffering through an extended heatwave, with record temperatures and increased power use that could potentially lead to stockpile reductions.

As it prepares for its peak shipping season, which starts August 1, revenues are projected to rise from $US4.86 billion to $5.2 billion.

“We're not really expecting it to be gangbusters but we're expecting it to be a little better than last year,” Koraleski said.

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