The surge in coal demand could be a shot in the arm for railroad operators that reported downbeat earnings in recent quarters on slowing shipping demand from across industries
U.S. thermal coal exports in June-July rose to 5.780 metric tonnes from 5.350 during the same period a year earlier, data from analytics firm DBX Commodities showed.
CSX Corp, second largest U.S. public railroad operator by market value, expects “hot summers to provide a helpful tailwind” early in the current quarter, both internationally and domestically. “We’re getting a lot more interest … given some of the heatwaves we’re having,” said the company.S&P Global Commodity Insights analyst Shayne Willette said daily coal generation in the Lower 48 states jumped nearly 50 per cent between June 1 and July 25, compared with a 20 per cent rise in natural gas.
As of 2022, coal accounted for about 20 per cent of total U.S. power generation, compared to 39.8 per cent from natural gas and 22 per cent from renewables, according to the Energy Information Administration . But with coal demand set to decline by 50 per cent by 2030 on a sustained clean energy shift, railroads face roughly $5-billion in lost revenues in the long term, a 2019 report by Moody’s showed.The EIA projected coal’s share in U.S. power generation to drop from 20 per cent in 2022 to 16 per cent in 2023, and 15 per cent in 2024.
This could hurt Union Pacific. The biggest U.S. public railroad operator by market value moves thermal coal almost exclusively for domestic power generation, said Ben Nolan, analyst at Stifel Investment Services.
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