US railed LPG volumes, rates increased in 2014

OREANDA-NEWS. Shipments of liquefied petroleum gases including propane and butane increased significantly in 2014 and supported the railroads' ability to raise rates.

The volumes of LPG moving by rail increased 9.7pc in fourth quarter 2014 compared with the prior year level as producers looked for different ways to move their product to market. But the increase in traffic is causing some terminals to become overcrowded and railroads to issue embargoes to avoid holding loaded LPG cars in their own yards for long periods of time.

Much of the increased volume late in the year was related to shippers trying to move propane into the upper Midwest and northeast ahead of the winter heating season with the US operations of Canadian Pacific and CSX posting the largest volume gains.

CSX's traffic gained by 33pc to 15,619 carloads in fourth quarter 2014, up from 11,766 railcars in the fourth quarter of 2013, nearly four and a half times as strong an increase as Norfolk Southern (NS).

The other eastern railroad's traffic ended fourth quarter at 13,099 cars, up by 7.9pc compared with 2013's quarter. The NS traffic gain came as it was the only US Class I railroad to lower rates on the traffic over the period. Shippers paid 8.6pc less to move LPG on its lines at \$2,917.53/railcar in fourth quarter 2014, but still above the \$2,736.22/railcar average across all the large US railroads. Rates increased by 3.3pc across all of the large carriers.

CSX rates gained 13pc to \$3,184.41/railcar in the fourth quarter as its large volume increase underpinned the rate gains.

In the west, BNSF and Union Pacific (UP) rates increased slightly, but on an absolute basis ended up virtually identical for shippers moving LPG in the western US. Shippers on BNSF paid 1.9pc more at \$4,068.24/railcar in fourth quarter while UP customers were charged an average of \$4,052.29/railcar. UP's rates were 4.8pc higher than 2013's ending frame as longer length of haul helped both western railroads lead the way on the absolute level of rate paid.

But like CSX, the higher rates did not discourage customers from moving more LPG on the western systems. BNSF's LPG traffic increased by 3.9pc to 26,228 carloads and UP's business gained 15pc to 14,932 railcars, providing justification for the higher pricing.

On the US operations of Canadian National (CN) and Canadian Pacific (CP) volumes moved in opposite directions with CN's US LP volumes shedding 12pc to 8,497 carloads in the period and CP's traffic gaining 52pc to 4,010 railcars. CP saw stronger propane demand into the Midwest after the Cochin pipeline came offline.

Rates did not increase significantly in response to the higher traffic levels though as CP LPG rates gained 1.7pc to \$1,670.07/railcar. Part of the reason for CN's traffic dip could be a robust price increase, with rates on the carrier gaining 6.4pc to \$1,417.55/railcar.

Demand for LPG dipped significantly on the smallest US Class I railroad, Kansas City Southern, as traffic dropped 53pc to 551 carloads in fourth quarter 2014. Rates for shippers on the railroad increased 9.2pc to \$1,843.48/carload despite the sharp traffic loss.