Coal and the railways

It hasn’t been a good year for US railway operators. This week, Union Pacific reported that fourth quarter net income fell 17 per cent while BNSF’s fell 12.8 per cent, and CSX’s full year earnings were 16 per cent lower.

Railways are bound up with other aspects of energy use: as some commentators pointed out when the Berkshire Hathaway bid for BNSF was announced, it was at least partly a bet that future demand for coal and its associated transport would remain strong.

Although they benefited from high oil costs and booming trade for most of the past decade, Lex believes those days are over:

Some categories like automobiles, which saw traffic rise 50 per cent recently versus a year ago on restocking, are skewing the sense of recovery though. Other categories like coal, the bread-and-butter of most railroads, will remain depressed for some time.

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