Union Pacific Says Uncertainty, Harsh Weather Driving Down Rail Shipments
June 19 2019 - 6:49PM
Dow Jones News
By Jennifer Smith
Freight rail giant Union Pacific Corp. says its volumes are
declining this quarter amid poor weather and customer concern over
trade uncertainty.
"We're down about 4%," tracking with declines across the broader
industry, Union Pacific Chief Executive Lance Fritz said in an
interview Wednesday.
Mr. Fritz said he views the economy as fundamentally healthy but
that recent flooding in the Midwest and increased caution among
industrial shippers are weighing on Union Pacific's top line.
"We can see that when it comes to restocking and inventories, we
can see it when it comes to dialogues I have with customers about
their capital investment plans," he said. "And I think that's in
part driven by the uncertainties surrounding trade."
Shipping volumes across the railroad sector have been falling
this year. Carloads fell 2.1% in May compared with the prior year,
and then declined 9.1% and 4.6% in the first two weeks of June,
according to the American Association of Railroads, an industry
trade group. Volumes of key commodities including coal, forest
products and metals used in manufacturing have been tumbling at a
steep rate, and a decline in intermodal truck-rail loads has
accelerated this month.
The falloff in rail business comes as the U.S. freight transport
sector shows signs of weaker demand.
The Cass Freight Index of North American shipments by truck and
rail declined 6% in May, the sixth straight month in negative
territory. Cass Information Systems Inc., which handles freight
payments for companies and produces the monthly index, says the
downturn is "signaling an economic contraction" and "strengthens
our concerns about the economy and the risk of ongoing trade policy
disputes."
Coal shipments, the single biggest commodity on U.S. freight
rail networks, have declined 5.3% so far this year from a year ago,
according to the AAR, and the business has fallen at a steeper rate
this month.
"We believe coal is not going to grow back to what it was
historically," Mr. Fritz said. Union Pacific's "franchise is so
broad and diverse," he said, "that there's always something
percolating, there's almost always something that's doing well.
Right now, it's the Gulf Coast chemical franchise."
Carloads of petroleum and petroleum products rose 25.9% last
month compared with May 2018, according to the AAR, one of the few
bright spots in a declining market for commodities.
Write to Jennifer Smith at jennifer.smith@wsj.com
(END) Dow Jones Newswires
June 19, 2019 18:34 ET (22:34 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Union Pacific (NYSE:UNP)
Historical Stock Chart
From Mar 2024 to Apr 2024
Union Pacific (NYSE:UNP)
Historical Stock Chart
From Apr 2023 to Apr 2024