Posts Tagged ‘coal by rail’

Coal Traffic Decline Seen by Report

October 1, 2022

Although coal traffic has enjoyed a renaissance of late, it is not expected to last a research report indicated.

As reported on the website of Trains magazine, the report by Wolfe Research said a wave of retirements of coal-fired power plants is expected to reduce rail coal traffic.

Those retirements are expected to accelerate in 2025 and continue through the second half of the current decade.

The Wolfe report said about 23 percent of coal-fired electricity generating capacity will be retired over the next five years. That is expected to result in a 12.1 percent drop in Class I coal traffic by 2026.

In recent months rail coal traffic has ticked upward due to low stockpiles at power plants and high natural gas prices. Industry analysts expect that to continue into next year.

The Wolfe report noted that 70 power-plant retirement dates have already been announced. About three-quarters of those plants use coal mined in the Powder River Basin of Wyoming and Montana.

CSX is expected to lose 11.8 percent of its coal traffic while Norfolk Southern will lose 5.5 percent, the Wolfe report said.

Coal Mines Complain About Shoddy Rail Service

September 27, 2022

Add coal shippers to the list of disgruntled railroad shippers.

The National Mining Association has written to the U.S. Surface Transportation Board to complain about erratic rail service being provided by CSX and Norfolk Southern.

The letter said some mines have curtailed production due to poor rail service that’s only getting worse even as demand for coal rises.

“While mines are running full speed ahead, the same cannot be said for rail, and our members desperately need relief,” the group said in the letter, which said empty coal hoppers are arriving hours or days late.

In some instances, mining companies have used third parties to handle the switching and loading of coal trains on their property.

The letter was based on results of a survey sent to the trade association’s members.

For their part, the two Class 1 railroads cited crew shortages that they said they are working to address.

U.S. Coal Exports to Germany May See Boost

June 22, 2022

The German government recently decided to increase electricity generation from coal-fired power plants in response to European sanctions against Russia.

Russia reduced its exports of natural gas to Germany in response to the sanctions.

An analysis published on the website of Trains magazine said the move opens opportunities for coal traffic from U.S. railroads that serve export terminals shipping coal to Europe.

The German move is designed to enable the country to conserve its existing natural gas ahead of next winter.

In recent years the United States has been the second largest supplier of coal to Germany, trailing Russia.

However, among the sanctions that European governments have leveled against Russia is a ban on Russian coal.

The article can be read at

Rising Coal Prices May Benefit Railroads

May 21, 2022

Trains magazine reported this week on its website that rising coal prices may lead to increased coal traffic by rail.

The article said the coal supply is tight, which may prompt mining companies to tap into their reserves.

Spot prices of Illinois Basin coal have increased 225 percent compared with a year ago while Northern Appalachia prices are up 84 percent. Other coal mining regions have also seen rising coal prices.

Association of American Railroads figures show that through early May coal traffic on U.S. railroads had increased 7 percent in a year-over-year performance comparison. Through that date railroads had hauled 1.1 million carloads of coal.

Although coal traffic is up on Union Pacific and BNSF, it has been down on Norfolk Southern and CSX.

The article can be read at

Coal Uptick Seen Lasting Into 2022

January 26, 2022

The uptick in the use of coal by electric generating plants that occurred this year is expected to continue into 2022, Trains magazine reported on its website.

The magazine noted that the U.S. Energy Information Administration expects coal production this year to rise by 6 percent to 612 million short tons. That is an increase of 33 million short tons over 2021.

Industry observers have attributed the increased use of coal to rising natural gas prices and supply chain shortages of gas.

One challenge power plants face, though, is fewer coal suppliers due to decreases in mining capacity.

The coal mining industry has been going through a transformation that has included mergers, sales of properties, and financial difficulties triggered by the decline of the use of coal.

The Trains analysis concluded that coal companies are more likely to increase production at existing mines than to reopen closed facilities to meet the increased demand.

This is expected to result in a nominal increase in the number of coal trains and Trains said no specific railroad or power plant is expected to benefit exclusively although most of the added production is expected to originate in the Powder River Basin of Wyoming.

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CSX Scales Back Coal Country Infrastructure

December 8, 2021

At the same time that coal traffic has seen an uptick, CSX is paring back the number of sidings and double track that it operates in coal country.

A report on the Trains magazine website detailed areas of the Kanawha and New River subdivisions that have been single tracked and coal branches that have lost siding and yard tracks.

From a railroad perspective, the coal country infrastructure is overbuilt for the level of traffic that now exists and is expected to exist in future years.

The weekly and monthly U.S. freight traffic reports issued by the Association of American Railroads have shown increases in coal traffic this year as utility companies hedge against rising natural gas prices.

The article can be read at

Companies Bet on Metallergical as Coal’s Future

October 1, 2021

Coal traffic may be down, but it’s not out. In recent months high natural gas prices have led some utilities to increase their use of coal to generate electricity.

But when coal company executives look to future they see metallurgical coal as their future.

Used in the steelmaking process, metallurgical coal is higher priced than the thermal coal used to generate electricity.

Steel demand can be cyclical but railroads and coal companies see metallurgical coal as a reliable customer base.

A report posted on the website of Trains magazine cited a $400 million investment that Arch Coal is making in a loadout at its new Leer South longwall mine in Barbour, West Virginia, as an example of the direction that coal traffic is moving.

The loadout is located on a short line, the Appalachian & Ohio, which connects with CSX at Grafton, West Virginia.

The facility is expected to reach full production in early 2022. Arch is projecting shipping 4 million tons of coal a year, or 36,350 carloads making up 300 unit trains of 110 cars annually.

CONSOL Energy is investing $90 million in its Itmann mine in southern West Virginia, which will be capable of producing 900,000 tons of metallurgical coal and up to 1 million additional tons of third-party coal.

The Itmann complex is located on the former Virginian Railway – how operated by Norfolk Southern – near Mullens, West Virginia.

Coal mined there will be shipped to domestic steel mills and for export through the NS Lamberts Point Coal Terminal in Norfolk, Virginia.

Export coal is also seen by railroads and coal companies as a viable long-term enterprise.

Aside from Norfolk, some export coal moves on NS and CSX through the port of Mobile, Alabama. Both carriers also route export coal through Baltimore.

China leads the list of customers buying U.S. coal, having bought 2.3 million tons of metallurgical coal in the first quarter of this year.

Other big buyers have been Brazil, The Netherlands, Japan, India, and the Ukraine.

Rising Gas Prices Prove to be Boost to Coal

September 24, 2021

If you’ve been paying attention to the weekly rail traffic reports put out by the Association of American Railroads you may have noticed that in recent weeks and months coal traffic has been on the upswing.

In part that has followed in the wake of higher natural gas prices that have prompted some utilities to resume using coal to generate electricity.

Thus far this year, coal traffic has increased by 11.7 percent compared with the same period in 2020.

The U.S. Energy Information Administration predicts that coal will be used to create 24 percent of electricity generation in 2021 and 2022, up from 20 percent in 2020.

It is not, though, that utilities are giving up on natural gas, whose price has increased by 95 percent over the past six months. Natural-gas futures have risen to $5.10 per million British thermal units in recent days compared with $2.61 per million BTUs six months ago.

Instead, utilities are using coal as a supplement to natural gas for power generation as a hedge against higher gas prices.

And to be sure, coal loadings remain below 2019 levels. However, the evidence points toward greater use of coal at least in the short term.

Natural gas still accounts for a higher percentage of power generation, a projected average of 35 percent this year and 34 percent in 2022. In 2020, 39 percent of power generation came from natural gas.

Aside from higher gas prices, the supply of natural gas has been adversely affected by infrastructure issues.

Severe weather, including ice storms in Texas, hot and dry conditions in the West and damage caused by Hurricane Ida on the Gulf Coast last month has reduced natural gas production.

In mid September more than a third of the gas production in the Gulf region remained offline.

That comes at a time of year when utilities are  stockpiling the natural gas supplies.

The federal energy administration said in mid September that U.S. storage gas supplies are 3,006 billion cubic feet, which is 231 BCF below the five-year average and 595 BCF lower than last year at this time.

That could drive natural gas prices even higher as utilities approach winter peak demand periods.

However, the coal industry has its own issues, including tight supplies and transportation constraints. The pandemic has caused delays in coal deliveries.

Industry observers don’t expect the number of unit coal trains to significantly increase nor do they expect many closed coal mines to reopen.

What they expect is for coal traffic to remain at a consistent above-average volume over the next several months. They don’t foresee an unprecedented rise in rail coal volume.

Railroads have stored some of the equipment once used to move coal and management may be reluctant to spend to put it back in service to handle what they view as a short-term opportunity.

Still the demand for coal is expected to rise next year by 100 million short tons and export coal is expected to increase by 21 million short tons.

Canadian PSR Success Stories Unlikely to be Replicated by U.S. Class 1 Railroads

June 16, 2021

U.S. railroads that have adopted the precision scheduled railroading operating model like to describe it as a two-step process.

The first step involves ruthless cost cutting as freight schedules and operations are revised to move more freight in fewer and longer trains.

Some shops and yards are closed or reduced in their scope of operation, and layoffs are widespread as the carriers seek to do more with less.

The second chapter is a so-called pivot to growth. Class 1 railroads CEOs like to tell investor conferences that the savings from slimming down and becoming more efficient and reliable operators will enable railroads to chase after volume growth.

But what if the second chapter of the story is actually a myth?

Railroads have an answer for that. They’ll point to the experience of Canadian National and Canadian Pacific, both of which implemented PSR and once it was in place began enjoying double digit traffic growth.

Between 2010 and 2019 Canadian rail traffic rose 47 percent while U.S. rail traffic fell 2 percent.

Yet an analysis published on the website of Trains magazine suggested that what happened in Canada is less likely to occur in the United States.

What drove growth in Canada were factors unique to that country with much of it being driven by international intermodal, petrochemicals and fuel, and agriculture.

Canadian international intermodal traffic grew at the expense of U.S. West Coast ports and a 40 percent rise in containers landing at Canadian ports that were forwarded to the U.S. Midwest.

CN and CP also are hoping that Eastern Canada ports can divert traffic away from U.S. East Coast ports.

The Canadian carriers have other advantages including how farmers in Canada are more dependent on rail than is the case with U.S. farmers.

While Canadian agriculture shipments rose 16 percent over the past decade, U.S. agricultural rail volume fell 22 percent. In the United States, railroads haul less than 50 percent of grain ton-miles.

Coal offers another contrast. Most Canadian coal is metallurgical coal and exports of it to Asia drove a 10 percent increase in coal volume over the past decade.

In the United States, most coal is thermal coal used by power plants, many of which have been shifting to lower cost natural gas. U.S. railroad coal volume in the past decade fell 44 percent.

The Trains analysis noted CN and CP also have some other built-in advantages, including networks that are largely east to west across the country and rely far less than U.S. railroads do on interchange traffic.

The Canadian economy is more reliant on rail transportation because the country has longer distances between urban centers and a highway system that is less developed than that of the U.S. Therefore competition from trucking companies is less intense.

The analysis said CN and CP deserve credit for taking advantage of their opportunities and being creative in generating, for example, traffic to fill containers from U.S. destinations that would otherwise return empty to Asia.

They’ve done this by offering good service and competitive rates to keep this traffic from returning to U.S. ports, the analysis said.

It remains to be seen, the analysis concluded, how successful U.S. carriers will become in growing traffic as they claim to be doing.

But the key point, the analysis said, is that the type of success stories by U.S. Class 1 carriers that CN and CP have enjoyed are not guaranteed because of significant differences in the environments in which the carriers operate.

Biden Plan Would Accelerate Coal Decline

April 5, 2021

The Biden administration’s proposals to fight climate change would accelerate what has already been a downward decline of the use of coal for generating electricity.

That would further depress railroad coal traffic, industry observers say.

Rob Godby, an economics professor who is deputy director of the University of Wyoming’s Center for Energy Regulation and Policy, said the Biden proposals would accelerate the decline of coal that has been under way for a decade.

During the past 10 years, railroads have seen their coal traffic fall but “black diamonds” still remained a substantial source of revenue.

In 2020, coal was 12 percent of rail freight volume in the United States, figures from the Association of American Railroads show.

Coal was the single largest commodity that Class 1 railroads carried in 2020 and provided $7 billion in revenue.

Yet the use of coal to generate electricy has fallen from 48 percent of the nation’s power supply in 2008 to less than 20 percent last year.

Most coal mined in the United States is used to generate electricity but is also used in steel making and exported to other nations.

Biden has proposed using tax incentives for renewable energy for another decade while making power grid investments to support greater use of wind and solar power.

Godby said those changes, if implemented, will make it difficult for coal to compete on an economic basis with natural gas and renewable sources of energy.

“The bottom line is if this were to happen, you could say the Powder River Basin would almost entirely be shut down,” Godby said referencing a region in Wyoming and Montana served by BNSF and Union Pacific that produces nearly half of U.S. coal.

Godby said some renewable energy projects provide electricity more cheaply than coal, even without subsidies.

Transportation costs can take up three quarters of the delivered cost of coal to a power plant.

Even if Congress were to reject the Biden plan, Godby said coal is living on borrowed time and he expects demand for it to be a shadow of itself by 2035 when very little of the nation’s power will be generated by burning coal.

Already, coal producers are seeking to sell or shut down mines in the Powder River Basin. Arch Resources plans to close the Coal Creek mine in Wyoming in 2022 and reduce production at Black Thunder Mine, the second-largest U.S. coal mine.

The Biden infrastructure plan has proposed establishing as many as 10 power plant carbon capture demonstration projects.

But Godby said for those to be commercially viable, carbon capture would require technology and cost breakthroughs as well as the development of markets for carbon dioxide use.