POSITIONED FOR GROWTH BNSF Railway John Miller Group Vice President - - PowerPoint PPT Presentation
POSITIONED FOR GROWTH BNSF Railway John Miller Group Vice President Agricultural Products BNSF Railway 1 Historic Rail Industry Volumes U.S. Class I Weekly Rail Volumes 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 800,000
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BNSF Railway
John Miller
Group Vice President Agricultural Products BNSF Railway
450,000 500,000 550,000 600,000 650,000 700,000 750,000 800,000 (000) Units
Historic Rail Industry Volumes
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U.S. Class I Weekly Rail Volumes
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: AAR, CS-54 Data through Week 21, May 28, 2016
Recent Volume Trends Across the U.S. Rail Industry
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Year-over-Year Percent Change
Four-Week Rolling Average Volume U.S. Class I Rail Industry
10% 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 3 6 9 12 15 18 21
2015 2016
year-over-year
Last 4 weeks through Week 21
Source: Association of American Railroads (AAR) through week 21; May 28, 2016
Weeks
BNSF Weekly Volume Trends
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145 160 175 190 205 220 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 219K 215K
2006 Peak 2015 Peak
2016
BNSF Railway Units Weekly Railroad Traffic
Actuals Through Week 21
2007 2015
Source: Association of American Railroads (AAR) through May 28, 2016
Units
Economic Conditions
The Good, The Bad, and The Ugly
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ALL OTHER WASTE AND SCRAP FOOD AND KINDRED CHEMICALS LUMBER AND WOOD GRAIN GRAIN MILL PRODUCTS PULP AND PAPER CRUSHED STONE METALLIC ORES TRAILERS
30%
0.2% 0.5% 0.8% 0.9% 1.2% 7.6% 9.8% 18.0% 22.5%
U.S. Railroads (CS54 Groups, % Change in Units Handled)
2016 YTD, Most Recent 21 Weeks 2016 vs. 2015 (through May 28, 2016)
Source: Association of American Railroads (AAR) through May 28, 2016
U.S. Economic Outlook Trend 2016
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GDP IPI Less Tech
Source: IHS Economics, May 2016
y/y percent change
2016 Annual Forecast Changes Over Time
The Rail Industry Sees Cyclical Movements Similar to GDP
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12% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 U.S. Rail Volumes U.S. GDP
Percent Change Year-over-Year
Exchange Rates
Wall Street Journal U.S. Dollar Index
8 Source: Wall Street Journal, BUXX; June 3, 2016
64 73 82 91 100
01/01/2013 03/19/201306/04/2013 08/20/201311/05/2013 01/21/201404/08/2014 06/24/201409/09/2014 11/25/2014 02/06/201504/24/2015 07/10/201509/25/2015 12/11/2015 02/26/2016 05/13/2016
June 3, 2016 86.15
+19% vs. Jul '14
U.S. Dollar Index
BNSF is a Leading U.S. Railroad
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intermodal facilities
innovation
trains operate on an infrastructure financed almost entirely by the railroad
2015 BNSF Density Flow
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What BNSF Carried in 2015
(thousands of units)
INDUSTRIAL PRODUCTS
Y/Y CHANGE -5.9%
COAL
Y/Y CHANGE +0.7%
AGRICULTURAL PRODUCTS
Y/Y CHANGE +7.2%
(000) Units
CONSUMER PRODUCTS
Y/Y CHANGE +0.5%
Consumer Products Commodity Breakdown
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Domestic International Automotive
BNSF Network – Consumer Products
12 2015 BNSF Consumer Products Density Flow
Consumer Products
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The long-term outlook for Domestic intermodal is strong given the demand for Highway-to-Rail conversions International intermodal will grow with the economy and Trans- Pacific Trade Regulatory pressure on Truck Industry – Hours of Service, Electronic Logging Device, Drug and Alcohol Database, Speed Limiters
Consumer Products Market Drivers
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Source: IHS Economics, FTR
GDP GROWTH VS. INTERMODAL GROWTH
37 38.8571 40.7143 42.5714 44.4286 46.2857 48.1429 50 J a n
J u l
J a n
J u l
J a n
J u l
J a n
1 J u l
1 J a n
2 J u l
2 J a n
3 J u l
3 J a n
4 J u l
4 J a n
5 J u l
5 J a n
6 J u l
6 J a n
7 J u l
7 J a n
8 J u l
8 J a n
9 J u l
9 J a n
RETAILERS INVENTORIES
0.0% 4.0% 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4
Real GDP Less-Tech Mfg.
REAL GDP VS. "LESS-TECH" MANUFACTURING OUTPUT
1% 8% 16% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
U.S. GDP NA Intermodal
Driver Shortage (-) / Surplus (+)
'(300) '(225) '(150) '(75) '- 75 150 225 300 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 2015.1 2016.1 2017.1 2018.1
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What BNSF Carried in 2015
(thousands of units)
CONSUMER PRODUCTS
Y/Y CHANGE +0.5%
INDUSTRIAL PRODUCTS
Y/Y CHANGE -5.9%
AGRICULTURAL PRODUCTS
Y/Y CHANGE +7.2%
(000) Units
COAL
Y/Y CHANGE +0.7%
BNSF Network - Coal
16 2015 BNSF Coal Density Flow
Coal
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Decreased electricity generation due to record mild winter and low natural gas prices has resulted in all-time high coal inventory levels Unfavorable export market driven by worldwide supply and strong dollar Increased Federal regulation leads to more renewable capacity and coal plant closures in the long-term
Coal Energy Markets
Low natural gas prices and softening utility generation
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PRB INVENTORIES
30 51 73 94 115 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Days of Burn Normal Days of Burn
PRB COAL BURN
16 23 31 38 45 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16
NATURAL GAS PRICE
$0 $2 $3 $5 $6 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Source: Nymex; Energy Ventures Analysis; EEI Days Days
WEEKLY U.S. POWER GENERATION
60,000 145,000 230,000 315,000 400,000 Jan May Jun Jul Nov Dec
2015 5 YR MIN 5 YR Range 2016 5 YR AVG
kWh
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What BNSF Carried in 2015
(thousands of units)
COAL
Y/Y CHANGE +0.7%
AGRICULTURAL PRODUCTS
Y/Y CHANGE +7.2%
(000) Units
CONSUMER PRODUCTS
Y/Y CHANGE +0.5%
INDUSTRIAL PRODUCTS
Y/Y CHANGE -5.9%
Industrial Products Commodity Breakdown
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Building Products
Paper, Pulp, Lumber, Panel, Rail Equipment, Transformers, Generators, Roofing Materials, Waste Construction Products Pipe, Sheet, Structural, Scrap, Taconite, Aluminum, Sand, Salt, Clays, Crushed Stone, Cement, Lime, Gypsum
Petroleum Products
Crude Oil LPG Asphalt Alcohols & Solvents
Food & Beverage
Beer & Wine Canned Goods Perishables Vegetables
Chemicals & Plastics
Acids, Intermediates, Caustic Soda, PVC, Polypropylene, Polystyrene, Polyethylene
BNSF Network – Industrial Products
21 2015 BNSF Industrial Products Density Flow
Industrial Products
Dramatically lower oil prices have driven down demand for petroleum and its associated products (such as frac sand and steel pipe) Demand for residential and commercial construction materials (aggregates, cement and lumber) remains solid
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The strong U.S. Dollar is limiting steel exports, as well as steel inputs such as taconite
Active Oil Rig Counts Bottoming Out
Current rig count supported by improved supply-demand and pricing environment
23 Source: Baker Hughes, BTU Analytics, EIA.gov
U.S. OIL RIG COUNT
Rig Count 450 900 1,350 1,800 1/2/09 8/14/09 3/26/10 11/5/10 6/17/11 1/27/12 9/7/12 4/19/13 11/27/13 7/11/14 2/20/15 10/2/15 5/13/16
WEEKLY WTI SPOT PRICE 2009-CURRENT
$/bbl 30 60 90 120 Jan-09 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Oct-14 Apr-15 Oct-15 Apr-16
CRUDE OIL PRODUCTION (Lower 48 States-Onshore)
Million bbls/day 2 3.5 5 6.5 8 May-16 Nov-15 May-15 Nov-14 May-14 Nov-13 May-13 Nov-12 May-12 Nov-11 May-11 Nov-10 May-10 Nov-09 May-09
NEW WELL OIL PRODUCTION PER RIG
'- 250 500 750 1,000 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Bakken Eagleford Niobrara Permian BBLS/day
Successful Leadership – Successful Business
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What BNSF Carried in 2015
(thousands of units)
INDUSTRIAL PRODUCTS
Y/Y CHANGE -5.9%
COAL
Y/Y CHANGE +0.7%
(000) Units
CONSUMER PRODUCTS
Y/Y CHANGE +0.5%
AGRICULTURAL PRODUCTS
Y/Y CHANGE +7.2%
Agricultural Products Commodity Breakdown
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Grain Wheat Barley Corn Soybeans Milo Bulk Foods Sweeteners Syrups Animal Products Starch Other Grain Products Oils Feeds Flour Specialty Grains Oilseeds & Meals Malt Ethanol Fertilizer
BNSF Network – Agricultural Products
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2015 BNSF Agricultural Products Density Flow
Agricultural Products
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U.S. grain supplies are at their highest levels in almost 30 years after three consecutive large crops, incenting farmers to store grain Grain exports remain challenged due to the strong U.S. dollar and high domestic/global supplies Global demand continues to outpace supply
Agricultural Products Market Drivers
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Source: USDA.gov; www.investing.com
60,000 65,000 70,000 75,000 80,000 2011/12 2012/13 2013/14 2014/15 2015/16 Supply Demand
WORLD GRAIN SUPPLY OUTPACING DEMAND '- 750 1,500 2,250 3,000
2011/12 2012/13 2013/14 2014/15 2015/16
CHINESE SOYBEAN IMPORTS
$70 $80 $90 $100 $110 $3 $5 $6 $8 $9 Jan-10 Jul-10 Jan-11 Aug-11 Feb-12 Sept-12 Mar-13 Oct-13 Apr-14 Nov-14 May-15 Nov-15
Corn Price U.S. Dollar Index
'- 875 1,750 2,625 3,500
2011/12 2012/13 2013/14 2014/15 2015/16
Corn Wheat Soybeans U.S. RECORD ENDING GRAIN STOCKS STRONG DOLLAR VS. CORN PRICE
Corn Price Million Bushels Million Bushels Million Bushels
Northern Migration of Crop Production –
1950 -2015
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U.S. Farm Income Decreases
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Source: USDA (http://ers.usda.gov) – U.S. and State-Level Farm Statistics February, 2016
USDA forecasting a 40% decrease in U.S. Farm INCOME in 2016 v. 2014 Total U.S. Farm DEBT will RISE $9B year over year – totaling $373B in 2016 Total U.S. Farm EQUITY expected to decrease by 2% in 2016
Rail Industry Capital Spend Over the Years
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$10.0 $15.5 $21.0 $26.5 $32.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Capital Spend
Record Railroad Spending on Infrastructure & Equipment*
Source: AAR * Capital spending + maintenance expenses. Data are for Class I railroads
$ Billions
BNSF’s Capital Investments
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2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016F
Replacement Capital Expansion PTC Locomotive Equipment $5.8
$ Billions
2016 Capital Investments
8% 12% 14% 66%
Core Network and Related Assets Locomotive, Freight Car, and Other Equip Expansion and Efficiency PTC
2016 Capital Commitment $4.2B
$2.8 billion
Core Network & Related Assets
$600 million
Loco, Freight Car, & Other Equip
$500 million
Expansion & Efficiency
$300 million
Positive Train Control
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