U.S. auto sales generate the most business for railroads in four years

Article by Christian Andrei, on May 18, 2012

The recovery in auto sales in the U.S. has also given the business of railroad companies, Union Pacific Corp. and Norfolk Southern Corp., a huge boost. In fact, both are doing the best that they have in four years. The Association of American Railroads said that in the last week of March, there were 17,283 carloads for the American rail shipments of motor vehicles and parts – the highest since June 2008.

In April 2012, there was a 21% increase compared with April 2011. Their shipments came behind the petroleum shipments. Auto sales averaged nearly 14.5 million at an annual rate from January to April 2012, making up for around 30% of the gain in Norfolk Southern's first-quarter revenue and 14% of Union Pacific's, according to company data. The truckers and even the railroad-equipment manufacturers benefited from the strengthening motor-vehicle industry.

They have helped boost U.S. growth, extending from the Port of Charleston in South Carolina to the Mexican border at Laredo, Texas. Peter Nesvold, an analyst in New York with Jefferies & Co., said, “What's good for autos is good for the economy.” He explained that supplies and finished products have to be transported and capacity will become tighter if autos continue to improve. This will then mean that the rates charged for shipments "will start to get better."

The automotive volume of Union Pacific, the biggest U.S. rail carrier and based in Omaha, Neb., increased by 15% in January- March. On the other hand, CSX Corp., the biggest eastern railroad, reported an 18% improvement. Meanwhile, Norfolk Southern had a 23% increase. The carrier based in Norfolk, Va. is the second-biggest in the eastern U.S. It posted an increase in the first-quarter revenue of $169 million. Of this figure, $49 million is related to autos. [source; Bloomberg]

Topics: united states, sales

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