Coal news and updates

Coal is hitching a ride on US rails again. The bulky fossil fuel has been under siege by environmental rules and competition from cheap shale gas. Railroads, the only practical way to haul coal across land, suffered collateral damage. 

 

But the story has shifted in the past few months. The amount of coal carried on trains has climbed nearly 50 per cent from an April nadir, according to the Association of American Railroads. Operators have confirmed the bump in traffic in new quarterly results. 

 

Investors want to know whether the worst is over for the railroads’ coal businesses, which once comprised nearly a third of revenues.

 

“They’ve rebounded off the bottom. As to how durable that situation is, that’s a different question,” says Larry Gross of FTR, a freight transport consultancy. 

 

Volumes are below levels of previous years. But CSX railroad, whose tracks weave through the struggling coal fields of Appalachia, collected $467m in coal revenue in the third quarter, up 12 per cent from the previous quarter. Union Pacific, which draws coal from Wyoming’s Powder River Basin, enjoyed a 47 per cent quarter-on-quarter jump in coal revenue to $728m. Norfolk Southern on Wednesday reported $397m in quarterly coal revenue, a 17 per cent rise from the previous quarter.

 

An abnormally hot summer was an important factor. Power stations ran hard to meet demand for air-conditioning, drawing US coal stocks down by more than a fifth from a record high 197m short tonnes in December to 151m short tonnes, the government estimates. More trains were needed to replenish coal piles at power plants. 

 

The “power burn” also pushed natural gas prices from $2 to $3 per million British thermal units — a level at which coal begins to compete with gas as a fuel to make electricity. The number of megawatt-hours generated by gas will be more than from coal this year and next, but the gap will be smaller in 2017, the US Energy Information Administration forecasts. 

SOurce:FT