Wednesday, March 14, 2012

UP expects 7% drop in 1Q coal volume

Written by  Luther S. Miller, Senior Consulting Editor

Union Pacific told JPMorgan's Aviation, Transportation and Defense conference Tuesday that while most shipping volumes are up this year, it expects a 7% drop in first-quarter coal volume due to the mild winter.

The company still anticipates a slowly rising economy and higher full-year earnings than last year.

"Coal inventory levels are up and the burn rate is down," Chief Financial Officer Rob Knight said. "What will change that glide path are summer conditions," if utility customers need more coal to produce electricity for air conditioners.

Utility inventories are averaging 75-day stockpiles, Knight said, compared with an optimal level of about 60 days.

He said chemical shipments are expected to be up 9% to 10% in the first quarter, with overall volumes up 2%.

"We've also been able to run a very efficient operation, and got started on some capital work that in harsher winter conditions would have been harder," he said.