No Love for Lance

Railroad Weekly Mar. 6 2023

Inside This Issue  

·   No Love for Lance: UP Investor Wants a New CEO

·   A Golden Age of Growth? That Dissident UP Investor Thinks So

·   Grow, Canada: Canadian Rail Freight Up Sharply, ex. Intermodal   

·   Land of the Flat: U.S. Rail Freight, ex Intermodal, Barely Growing at All

·   Kan-ticipation: Big STB Merger Decision Imminent

·   Warren’s Warning: Senator Urges STB to Reject KCS Merger

·   This Week: U.S. Jobs Report for Feb., Bank of Canada Meeting

·   Trade Crusade: Railroads Stress Importance of Cross-Border Biz

Track Talk

“A change in leadership will allow UNP [Union Pacific] to heal its relationships with employees, customers, and regulators; reestablish UNP’s importance to the US economy; and help the US accelerate the transition to a lower emissions environment.”

-Eric Mandelblatt, Managing Partner and Chief Investment Officer, Soroban Capital

The Latest

·   One way or another, Union Pacific will have a new CEO before the end of this year. But who will it be? A major shareholder is pushing for its own preferred candidate, while harshly criticizing current CEO Lance Fritz (see below for more). 

·   Fallout from Norfolk Southern’s East Palestine derailment continues, as regulators react with new initiatives. One from the FRA involves prioritized track inspections on routes carrying hazardous cargo. Railroads, meanwhile, opted (under pressure) to participate in the DOT’s Confidential Close Call Reporting System (C3RS), which allows employees to confidentially report unsafe conditions without repercussions.

·   It’s now March, which means the STB could announce its decision on the Canadian Pacific-Kansas City Southern merger any day now. Stay tuned…

·   Nothing too new on the demand front, with intermodal trends still looking weak, according to the latest AAR volume data. There’s a gaping divergence, however, between non-intermodal trends in Canada and non-intermodal trends in the U.S. Canadian carload traffic is up a scorching 14% y/y, while U.S. carload traffic is up just fractionally. One big difference is that grain traffic is up enormously north of the border but down 4% south of the border. Chemicals, coal, and even forest products are other categories where volumes are growing in the north but shrinking in the south. Five key categories of freight growing in both markets are autos, minerals, metals, petroleum, and farm products (ex. grain).

·   This will be a big week for the U.S. economy. On Friday, the Labor Department will publish its jobs report for February, keeping in mind that the January report was so strong that it triggered fears of more aggressive Fed policy. The Fed makes its next