Canadian railways at an advantage as lower energy volumes hit U.S. counterparts

Black tank cars used to transport crude oil from North Dakota are parked among other rail traffic at a train yard in Tacoma, Wash.

The major North American railways are experiencing an obvious slowdown in energy volumes as crude prices find it difficult to stay above US$50 a barrel, but the Canadian information mill faring much better than their U.S. counterparts, according to an analysis by CIBC World Markets.

Petroleum volumes shipped around the biggest U.S. railways – measured as weekly average originating carloads – fell 7% previously three weeks when compared to average reported in January and February, CIBC analyst Kevin Chiang said inside a note to clients.

In Canada, exactly the same measurement is down only 1% despite a 12% decline in crude originating carloads at Canadian Pacific Railway Ltd.

\”We continue to note that the crude franchise for the Canadian rails is tied more to Western Canada, which has a relatively more positive outlook because these volumes tend to be stickier than that of U.S. plays,\” Mr. Chiang said.

Some from the U.S. railways happen to be lowering their 2015 guidance because of weaker energy markets. Might Southern cut its revenue growth outlook by 200 basis points due to weaker-than-expected energy volumes, including coal. And CSX Corp. recently said its growth projections for crude by rail will be at the budget of its forecast range.

\”Looking forward, energy volumes will still be a concern,\” Mr. Chiang said. \”The real question is whether other commodities can offer enough of an offset to maintain full-year guidance numbers.\”

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