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Buffett's BNSF Looks to Shift Away from Coal as Volume Sags (CSX) (NSC)

January 8, 2013 12:02 PM EST Send to a Friend
Is this another bet on the economic recovery?

According to Bloomberg, Warren Buffett's Burlington Northern railroad will be investing a "couple hundred million dollars" to expand its capacity to carry crude products by 40 percent. CEO Matt Rose commented that the move was to offset the decline in coal shipments.

Crude shipments are expected to reach 700,000 barrels per day and mainly be tied to the oil-rich Bakken shale formation.

Though BNSF report largely flat cargo volume in 2012, competitors mostly reported declines. Coal shipments fell 6.2 percent for BNSF last year while chemical carloads rose 26 percent.

BNSF is also in talks with peers like Norfolk Southern Corp (NYSE: NSC) and CSX Corp (NYSE: CSX) to carry crude to East Coast customers. The railroad is also working to build new loading facilities along its 32,000-mile rail network.

With economic conditions showing some improvement and crude prices remaining rather range bound recently, the shift from coal to crude might be a profitable effort for BNSF. Buffett acquired the railroad for $26.5 billion in 2010.




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