Posts Tagged ‘coal traffic’

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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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.

Loss of Coal Traffic Drove Class 1 Freight Volumes Downward During 2nd Quarter of 2020

July 3, 2020

Loss of coal traffic was a major driver in sharp volume declines for North America’s Class 1 railroads in the second quarter of 2020.

The carriers posted an aggregate 19 percent decline during the period with Norfolk Southern taking a 56 percent hit.

From a historical perspective, coal traffic was down 34 percent when compared to the volumes posted in the second quarter of 2019.

NS also suffered a steep 26 percent drop in overall traffic during the second quarter of 2020 due to shut downs of automotive plants amid the COVID-19 pandemic.

Automotive plants were closed during April and much of May but have since reopened.

Intermodal traffic was down a collective 11 percent for the Class 1 railroads during the quarter.

It also presented a sharp contrast. On one hand parcel shipments increased as consumers relied more heavily on e-commerce during stay home order periods.

But that was more than offset by the closure of numerous retail stores and falling international intermodal shipments because retailers maintained high levels of inventory during their shutdowns.

Carload traffic for the Class 1 railroads was down 22 percent collectively with NS suffering the greatest loss at 30 percent. This category excludes coal and intermodal shipments.

Second quarter financial results for publicly traded Class I railroads will be released later this month.

UP CEO Sees Coal Traffic Bottoming Out

February 28, 2020

The decline of coal traffic may have bottomed out for now one railroad CEO believes.

Speaking to the Barclays Industrial Select Conference, Union Pacific head Lance Fritz said only the most efficient power plants that use coal are still in operation.

Natural gas has eclipsed coal as the fuel of choice at many power plants due to its low cost.

Fritz said there are few coal-fired power plants left and those form a baseline of coal loadings.

He doesn’t believe the haulage of coal by railroads will rebound from the extended slump it has been in and which has affected the financial positions of such other Class 1 railroads as Norfolk Southern and CSX.

At UP, coal traffic is down 30 percent thus far in 2020. It declined by 16 percent in 2019.

Much of the coal hauled by UP originates in the Powder River Basin of Wyoming.

Also working to depress the use of coal are increased use of wind and solar energy.

The U.S. Energy Information Administration projects that another wave of closings of coal-fired plants will occur over the next five years.

The agency said that natural gas prices last year were their lowest in the previous three years.

Fritz noted that the loss of coal traffic underlies UP’s stagnant traffic volume over the past 15 years.

“That’s a big, big deal,” Fritz said of the decline of coal traffic. “That in and of itself is tens of thousands of carloads a week.”

Last week UP hauled 15,294 carloads of coal whereas in the same week of 2011 it handled 43,007.

UP’s approach to coal traffic, though, stands in marked contrast to that of western rival BNSF which has been able to retain some of its coal business by cutting rates in an effort to discourage coal-fired plants from switching to natural gas.

For its part, UP has engaged in what it described as “judicious pricing” of its traffic to earn an acceptable return.

Powder River Basin coal traffic peaked in 2008. Since then BNSF coal volume from that region has fallen 24 percent while UP’s volume has plummeted by 59 percent.

BNSF’s coal volume is down 6 percent this year and fell 6 percent last year.

Information the carriers reported to the U.S. Surface Transportation Board indicate that last week BNSF dispatched 35 coal trains from the Powder River Basin while UP had 12.

KRR Coal Traffic Has Exceeded Expectations

August 26, 2016

An executive with Watco Companies said that it underestimated the demand for Appalachian coal when it launched the Kanawha River Railroad.

Kanawha River RailroadA month after the KRR began using the former West Virginia Secondary and Princeton-Deepwater District of Norfolk Southern, it has been running coal trains almost daily.

“Coal traffic is more than we anticipated — the domestic utility coal is up right now,” Kanawha River Railroad General Manager Derrick Jackson told Trains magazine.

As a result, the KRR has acquired additional locomotives and hired more employees for train and engine service.

The KRR has leased 10 NS SD60s and has its own fleet of three SD40-2s and four GP39-2s that are used to handle freight and local traffic.

In speaking with Trains, Jackson said the KRR is actively seeking to increase the local freight business.

Using trackage rights, KRR trains terminate at Watkins Yard on NS in Columbus.

West Virginia and its Railroads Pondering Next Moves in a World of Declining Coal Production

March 16, 2016

The news over the past year for railroads that serve West Virginia has been bleak. Coal mines have closed and Norfolk Southern and CSX have mothballed routes that primarily serve as conduits to move coal to market.

CSX is in the process of closing its division headquarter in Huntington, West Virginia, and transferring its staff to other division offices.

In an analysis published by Trains magazine, railroaders based based in the Mountain State said they continue to brace for further cutbacks.

West VirginiaThe slippage of coal business has other worried in West Virginia, too, because so much of the state’s economy is built on black diamonds.

State officials are talking about the need to diversify the West Virginia economy. Railroads are expected to play a role in that process.

“While we diversity our state’s economy, we must take advantage of our location and existing infrastructure to recruit and develop businesses that rely on rail transportation to move their products,” West Virginia state Senator Bill Cole told Trains. “This includes a manufacturing strategy to revitalize our product output and making our state a warehouse hub for distribution.”

That means that during the current session of the state legislature lawmakers are considering adopting laws to make their state more attractive to businesses. The measures being considered include regulatory reform and right-to-work law changes.

NS and CSX each have taken steps to diversity their traffic bases in West Virginia.

NS recently opened an intermodal complex near Huntington as part of its Heartland Corridor route.

CSX has being routing intermodal trains over its former Chesapeake & Ohio main line between North Baltimore, Ohio, and Portsmouth, Virginia

However, Trains noted, these trains may be rerouted over the CSX New Castle Subdivision once the railroad finishes its National Gateway Project. Clearance restrictions in Washington are keeping double-stacked container trains from moving through the nation’s capital.

Justin Gaull is the vice president of economic development for the Charleston Area Alliance.

As he sees it, the new NS intermodal center at Prichard represents an opportunity for southern West Virginia to connect its manufacturing and distribution businesses  . . . and perhaps a few businesses could be linked to the facility exclusively via rail using existing rail infrastructure.”

Gaull told Trains that the decline of coal has opened an opportunity for West Virginia economic development officials to analyze the state’s inventory of available rail and land assets that can be offered to attract manufacturing and distribution locations.

But not all of West Virginia’s rail lines are suitable for such activities and some of the coal branches are likely to wind up becoming hiking and biking trails.

In some instances, the rails might remain in place and opened for use by foot-pedaled rail carts, which are quite popular in Austria and Germany.

However, few rail lines in America have been used for those carts. But that may soon change in West Virginia.

Christine Kindern is an extension agent in Raleigh County, which is seeking to convert 15.2 miles of an abandoned CSX route into recreational use.

The line in question is the Jarrolds Valley Subdivision from between Whitesville and Clear Creek.

The Raleigh County Commission and National Coal Heritage Area funded a study that found that converting the rail line to recreational use would boost tourism.

The New River Gorge Regional Development Authority might convert a former C&O coal branch to a museum that would celebrate the state’s coal heritage.

West Virginia has more than 500 miles of branch-line routes that are used exclusively to haul coal.

Many of those miles are facing abandonment although local officials have not given upon converting some of them into other uses to be served by rail.

NS to Idle Coal Pier in Ashtabula

December 23, 2015

Norfolk Southern will shutter its coal dock in Ashtabula and shift its work to a similar facility that it operates in Sandusky.

The Ashtabula docks will continue to be open through May 2016 when all coal inventories are expected to have been transloaded.

NS said it would keep the Ashtabula docks idle and reopen them as business needs warrant it.

Coal traffic on NS has fallen by 16 percent this year through the end of the third quarter.

“Norfolk Southern is committed to providing shippers with an efficient transportation network, and we are actively addressing the industry-wide decline in coal volumes by streamlining operations and positioning our railroad for long-term success,” said David Lawson, NS vice president for coal marketing in a news release.

The consolidation will result in 21 job positions being cut. Earlier this month, NS furloughed 13 employees in Ashtabula.

NS said that employees affected by the Ashtabula shutdown can apply for other positions within the company.

The railroad will continue to employ six workers in Ashtabula to oversee security and environmental systems.

The former Conrail facility in Ashtabula primarily serves the thermal coal market and receives coal from Ohio, Pennsylvania, and West Virginia that is transloaded onto boats destined for points in Canada and the United States via Lake Erie.

CSX also has rights to use the Ashtabula dock. It accesses the dock through trackage rights on a portion of the NS Youngstown Line.

“Coal has been – and continues to be – a significant part of Norfolk Southern’s heritage of service and success,” said Mike Wheeler, NS senior vice president operations, in the news release. “Our customers depend on us to provide a high-performing, 21st Century transportation option that is safe, efficient, and reliable. Norfolk Southern is adapting to evolving market conditions by realizing efficiencies and optimizing our infrastructure to support long-term growth.”

It is not clear what effect the idling of the Ashtabula coal pier will have on the railroad’s Youngstown Line. The route feeds directly into the pier although it also has connecting tracks in Ashtabula with the Cleveland-Buffalo route of NS.

Traffic on the line north of Youngstown, which is already sparse, may become even thinner.

NS said that it employs 3,700 people in Ohio and has 2,200 miles of track in the state.

CSX May Consolidate, Shut Down Coal Branches

October 10, 2015

In the face of declining coal business, CSX is looking to consolidate and close some routes in West Virginia, Virginia and Kentucky where the primary commodity hauled is coal.

Trains magazine reported that one target might be the Big Sandy Subdivision, which connects Russell, Kentucky, and Shelby Yard in Pikeville, Kentucky.

The route continues southward from Pikeville over the former Clinchfield Railroad mainline to Erwin, Tennessee, and Spartanburg, South Carolina.

Other routes that may be affected include the Logan, Coal, and Big Coal subdivisions in the Kanawha Coal Rate District and lines in the New River Coal Rate District.

Trains reported that some dispatching desks and yardmaster positions already are being consolidated.

CSX has declined to comment about the prospects of reduced operations in its coal regions because it is in a quiet period ahead of its announcement of third quarter earnings. That announcement is expected to be made the week of Oct. 11.

Some of the railroad’s coal-oriented lines are operating at less than 50 percent capacity.

Patriot Coal recently gave layoff notices to more than 1,000 miners in Kanawha and Boone counties in West Virginia.

Alpha Natural Resources has announced it will suspend operations at two mines in southern West Virginia by the end of November, resulting in furloughs for 92 workers.

BNSF’s Rose Doesn’t See Coal Volumes Returning

August 11, 2015

A top U.S. Class 1 railroad executive told an energy conference that coal traffic on the railroads is in decline and that it is not going to recover.

In fact, Matthew K. Rose, the executive chairman of BNSF, fears that the Power River Basin line may become stranded assets.

Rose, speaking at the U.S. Energy Information Agency’s 2015 EIA Energy Conference, said changing energy policies have led to falling coal volumes.

In 2006, BNSF moved 287 million tons of coal out of the Powder River Basin in Wyoming and Montana.

“It was a time of heavy coal demand,” Rose said. “We had a severe weather disruption in the basin that constricted deliveries going into the summer. The administration and Capitol Hill strongly believed that our investment in our coal network was insufficient and that much more investment was needed if we were to meet the forecast of demand going forward. We invested heavily and now the capacity and the operations of the [Powder River Basin] lines are very, very impressive.”

Less than a decade later, Rose doesn’t believe that BNSF will see that level of coal volume again.

“That leaves us with millions of dollars in investment in what will eventually be stranded assets,” he said.

For now, Powder River coal remains important to BNSF’s bottom line, accounting for about 20 percent of its traffic and 25 percent of its revenue.

Rose doesn’t believe that the same scenario will play out with crude oil, “because other commodities benefit from the expansion of these crude routes.”

CSX Expects 5% Decline in Coal Traffic in 2015

March 5, 2015

CSX is projecting a 5 percent or greater decline in coal volume in 2015.

Chief Financial Officer Fredrik Eliasson said the decline in coal shipments reflects the relatively mild winter weather and low natural gas prices.

With oil prices being low, CSX expects growth in crude oil shipments to be more moderate than originally expected.

Eliasson said the railroad also expects merchandise and intermodal traffic to grow this year.