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Rail shipments of coal slump at start of 2016

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World Coal,

US shipments of coal by rail have started the year significantly lower than the same period in 2015, according to data from the Association of American Railroads (AAF).

Coal carloads fell 30.3% in the week ending 6 February – the latest week data is available for – to 73 298 carloads, continuing a trend seen in January, when coal carloads were down 33.3% on 2015.

2016 coal rail shipments (purple) have slumped by about a third compared to 2015 (blue)

The slump in coal shipments comes as US utilities turn increasingly to low-cost natural gas, as well as drawing down stockpiles of coal that stood at 175.8 million short t at the end of October 2015, according to date from the US Energy Information Administration (EIA).

Meanwhile, Peabody Energy said it expects shipments of coal to fall by between 150 and 170 million short this year on projected coal plant retirements and natural gas switching, which will see utility demand for coal fall by 40 – 60 million short t, as well as stockpile drawdown.

In its recent full-year results release, US rail company Norfolk Southern announced coal revenues down US$1.8 billion in 2015 due to a 16% fall in volumes and announced a series of measures to control costs in 2016.

Earlier in January the company said it would combine its Virginia and Pocahontas divisions, which cover the Appalachian coal region, into one new Pocahontas division, saying that it needed to be “nimble and adapt to changing market conditions.”

Fellow US rail operators, BNSF – which covers the Power River Basin (PRB) in the west of the country – revised its agreement with PRB coal miners Cloud Peak Energy, removing volume obligations for the period 2016 – 2018: another acknowledgement that coal shipments were to be lower than forecast when the agreements were first signed.

In addition to falling utility demand, US coal shipments have also suffered from the collapse in US coal exports from a peak of 125.7 million short t in 2012 to just 58.7 million short t in 2015 – with further falls expected this year.

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