Rail Traffic Comes in Strong this Week

Rail Traffic Comes in Strong this Week
<a href="https://pixabay.com/users/Fotoworkshop4You/">Fotoworkshop4You</a> / Pixabay

Total N. American rail traffic came in at 692k cars last week (716k adjusted). The adjusted number (for decline in coal shipments ~20k/wk) easily surpasses last years 698K. The coal adjustment this week is 24k cars YOY. This will bear watching but it seems as though coal traffic is beginning to fall even more YOY than we were seeing over the summer. The weekly divergence has gone from a 18k-22k weekly change to a 22k-25k difference.

Rail Traffic Comes in Strong this Week

This signals even more utilities may be switching to gas to generate electricity and this will further skew the numbers. This has been a recent trend (4-5 weeks) so we’ll just keep an eye on it for now rather than declare a switch. These adjustments will be necessary because of their size until the spring of ’13 (this is when the collapse in coal traffic comps began). At that time we will have to watch both the mix of electric generation and the YOY change is total generation at the EIA. This will tell us if drops in gas or coal are due to a generation fuel mix or falling electric demand.

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As for this week both “chemicals and petroleum” and “stone and related products” showed strong gains (think construction and manufacturing). Some of the chemical category is oil from the Bakken but YTD that is running just over 3k cars a week average for the first 26 weeks of ’12 so it is not a huge driver of weekly traffic yet. I expect it will be as ’13 progresses

Here is the chart:
Capture641 610x420 Rail Traffic Remains Elevated

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Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis. His blog features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and is a RealMoney.com contributor. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”.

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