Union Pacific says high diesel prices shifting freight from trucks to rail

Sept 16 (Reuters) - Union ‌Pacific on ​Wednesday ​said soaring diesel prices were prompting some shippers to move freight from trucks ‌to rail, boosting demand for the railroad ⁠as customers seek lower transportation costs.

Speaking at the Morgan ‌Stanley Laguna Conference, Chief ‌Financial Officer Jennifer Hamann said the railroad was beginning to see customers make the shift ​because of the fuel-efficiency advantage, providing an additional boost beyond broader cyclical improvements in ⁠freight demand.

• Union Pacific expects diesel fuel costs to average about $4.25 ​a gallon in the third quarter, but is currently paying about $5.25 to $5.30 a gallon, ​creating pressure on its ‌operating ratio, Hamann said.

• Despite higher fuel costs, Union Pacific said its underlying business ⁠remained robust, with broad-based strength in industrial shipments and intermodal traffic continuing to drive volume growth ⁠during the quarter.

• The company is yet to see significant ​demand destruction from higher energy costs, with customers still "pretty bullish," Hamann said, citing healthy order books and inventory trends that ‌point to continued freight demand.

• CEO Jim Vena said elevated fuel prices were ‌not ideal for the broader economy, but ⁠noted the railroad has ‌not seen a ​slowdown in shipments so far.

(Reporting by Apratim Sarkar in Bengaluru; Editing by Jonathan ‌Ananda)

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