Union Pacific 2010 Annual Report Download - page 28

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28
Chemicals – Higher volume, price improvements,
and fuel surcharges increased freight revenue from
chemicals in 2010 versus 2009. Reduced
inventories and purchases delayed from 2009
increased fertilizer shipments by 30% in 2010. A
modest rebound in market conditions and more
normalized inventory levels increased demand for
industrial chemicals during the year, driving volume
levels up 8% versus 2009. In addition, shipments of
soda ash increased 12% as continued strong export
demand outpaced weak 2009 export demand.
Reduced volume and fuel surcharges decreased
freight revenue from chemical shipments in 2009
versus 2008. Pricing improvements partially offset
these declines. Weak market conditions reduced
shipments of industrial chemicals in 2009 compared to 2008, driving volume levels down 16%. High
inventories, production curtailments, and delayed purchases combined to reduce fertilizer shipments by
29% in 2009. Additionally, business interruptions resulting from Hurricanes Gustav and Ike lowered
volume levels in the third quarter of 2008, contributing to a more favorable year-over-year comparison.
Energy – Core pricing gains, higher fuel surcharges
and modest volume growth increased freight
revenue from energy shipments in 2010 compared
to 2009. Shipments from the Southern Powder
River Basin (SPRB) were up 4% driven by higher
demand resulting from improvement in economic
conditions, warmer summer weather, and more
efficient deliveries (higher tons per car and
increased train size). Higher inventory levels
carried over from 2009 partially offset this demand
increase. Shipments from Colorado and Utah
mines were down 8% in 2010 versus 2009 due to
mine production interruptions and increased
competition from other low cost fuel options (natural
gas and eastern coal), weaker demand from our industrial customers, and high inventories at some utility
customer locations.
Lower volume and fuel surcharges reduced freight revenue from energy shipments in 2009 versus 2008.
Price increases partially offset these declines. Shipments from the SPRB and the Colorado and Utah
mines decreased 14% and 25%, respectively, in 2009 compared to 2008. Continued economic weakness
and high coal inventories resulted in reduced demand at our utility customers, resulting in lower volumes.
Production problems at the Colorado and Utah mines and the loss of SPRB customer contracts also
contributed to the volume declines.
2010 Chemicals Revenue
2010 Energy Revenue