Union Pacific 2010 Annual Report Download - page 29

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29
Industrial Products – Volume gains, core pricing
improvement, and higher fuel surcharges
increased freight revenue from industrial products
in 2010 versus 2009. A federal government
remediation program involving removal of uranium
mill tailings from a Moab, Utah, site drove an
increase in short-haul hazardous waste shipments
versus 2009. Shipments under this program
began modestly during the second quarter of
2009. Steel shipments also increased due to
improving economic conditions, while shipments
of non-metallic minerals (primarily frac sand) grew
in response to more drilling for natural gas.
Stone, sand and gravel shipments grew in 2010
compared to 2009 as increased oil drilling more
than offset the decline in commercial construction
activity.
Reduced volume and fuel surcharges resulted in lower freight revenue from industrial products shipments
in 2009 versus 2008. Price improvements partially offset these declines. Weak demand and inventory
reductions resulting from the economic downturn drove a 53% decline in steel shipments in 2009
compared to 2008. The continued weakness in the housing market reduced lumber shipments, while
surplus production and overall market uncertainty resulted in lower paper and newsprint shipments in
2009 versus 2008. In addition, cement and stone shipments declined during 2009 due to high inventories
and weak commercial and residential construction activity.
Intermodal – Increased volume, higher fuel
surcharges (including new recovery provisions in
contracts renegotiated in 2010), and pricing gains
drove the increase in freight revenue from
intermodal shipments in 2010 compared to 2009.
Volume from domestic and international traffic
increased from 2009 levels, reflecting
improvements in economic conditions.
International volumes grew in response to
continued inventory restocking and higher
consumer demand. Domestic shipments
increased as a result of conversions from truck to
rail fueled by improved service operations. A new
contract with Hub Group, Inc., which included
additional shipments, was executed in the second
quarter of 2009 and contributed to the increase in domestic shipments.
Decreased volumes and fuel surcharges reduced freight revenue from intermodal shipments in 2009
versus 2008. Volume from international traffic decreased 24% in 2009 compared to 2008, reflecting
economic conditions, continued weak imports from Asia, and diversions to non-UPRR served ports.
Additionally, continued weakness in the domestic housing and automotive sectors translated into weak
demand in large sectors of the international intermodal market, which also contributed to the volume
decline. Conversely, domestic traffic increased 8% in 2009 compared to 2008. A new contract with Hub
Group, Inc., which included additional shipments, was executed in the second quarter of 2009 and more
than offset the impact of weak market conditions in the second half of 2009.
Mexico Business – Each of our commodity groups include revenue from shipments to and from Mexico.
Revenue from Mexico business increased 30% in 2010 versus 2009 to $1.6 billion. Volume levels for all
six commodity groups increased, up 25% in aggregate versus 2009, with particularly strong growth in
automotive, industrial products, and intermodal shipments.
Revenue from Mexico business decreased 26% in 2009 versus 2008 to $1.2 billion. Volume declined in
five of our six commodity groups, down 19% in 2009, driven by 32% and 24% reductions in industrial
products and automotive shipments, respectively. Conversely, energy shipments increased 9% in 2009
versus 2008, partially offsetting these declines.
2010 Industrial Products Revenue
2010 Intermodal Revenue