Union Pacific 2007 Annual Report Download - page 29

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25
Chemicals – Price increases and volume growth drove the
increase in revenue in 2007 versus 2006. Strong demand for
potash exports through Pacific Northwest ports and a
robust planting season for corn to supply ethanol
producers increased demand for fertilizer shipments in
2007. New business acquired in June 2007 contributed to
more shipments of plastics. Soda ash volume increased as
export demand grew in the Gulf area and Mexico. Lower
production at Canadian locations during the year boosted
shipments of liquid and dry chemicals from U.S. sources.
Price increases, fuel surcharges, and index-based contract
escalators drove the increase in revenue and ARC in 2006
versus 2005. Fewer fertilizer shipments largely drove the
volume decrease. Wet weather conditions in the Midwest
led to weak demand during the fall planting season. In addition, softer export markets for potash, a fertilizer
product, also led to reduced volumes. Business interruptions in the third quarter of 2005, primarily
attributable to Hurricane Rita, reduced chemicals shipments leading to favorable volume comparisons in
2006.
Energy – Price increases during 2007 improved both
revenue and ARC over 2006 levels. Volume was flat,
however, as severe storms in the first quarter and heavy
rains in May flooded coal pits in the SPRB, which closed
several rail lines and reduced volume levels. Shipments
from the Colorado and Utah mines were down 1% due to
lower mine production, predominately in the fourth
quarter of 2007.
Price increases, fuel surcharges, and index-based contract
escalators primarily drove the increases in revenue and
ARC in 2006 over 2005. Volume increases also contributed
to revenue growth as coal shipments from the SPRB mines
improved 8% during the year. These increases in 2006
partially reflect lower volume levels in 2005, as SPRB Joint Line disruptions, network disruptions resulting
from Hurricane Rita, and the October Kansas washouts hampered coal shipments in 2005. Conversely,
shipments from the Colorado and Utah mines declined 6% in 2006 due to mine shutdowns during the first
quarter of 2006, along with the impact of mining production problems and network maintenance throughout
the third quarter of 2006.