Eastern US railroad Norfolk Southern (NS) expects export and domestic utility coal shipments to remain constrained in the first quarter, despite strong demand.
NS chief marketing officer Alan Shaw said in an earnings call yesterday that utilities are “screaming for coal at this point.” Stockpiles at generators have fallen by 17 days over the past year, he said. But coal producers are keeping a lid on production so as not to overextend themselves should demand fall off again. That is limiting opportunities to move coal to utilities and for export.
The shortage of available coal is a “temporary constraint” that is expected to conclude by the end of the first quarter, Shaw said. Volume could rise this year, but mine constraints will be a “limiting factor in the near term,” he said.
The railroad hauled 14pc less coal to export terminals during the fourth quarter, as producers struggled to meet demand. NS shipped 6.3mn short tons (5.7mn metric tonnes) of export coal in the quarter, roughly 1mn st less than during fourth quarter 2017.
A strong increase in utility coal shipments offset the drop in exports. Utility coal volume rose by 1pc to 16.9mn st during the fourth quarter. Utilities increased coal intake by 1.6mn st. Domestic metallurgical coal shipments fell by 4pc, more than offsetting a small increase in domestic industrial coal deliveries.
Higher winter demand and natural gas prices in the fourth quarter drove domestic generators to coal, Shaw said.
But for the year, overall NS coal shipments fell, as a 6pc increase in export traffic could not make up for a 3pc decline in utility shipments. NS hauled 114.6mn st of coal in 2018, down by 1pc from 115.6mn st in 2017.
But coal revenue rose in the full year, as well as the fourth quarter, on higher rates and fuel surcharges. Fourth quarter coal revenue rose by 7pc to $457mn. Full-year revenue increased by 5pc to $1.8bn.
Revenue and volume also increased in the merchandise and intermodal segments, NS’ other primary business units.
Fourth quarter revenue rose by 9pc to $2.9bn compared with $2.7bn in fourth quarter 2017. NS moved 1.98mn railcars, including carload and intermodal traffic, a 2pc increase from a year earlier.
Metals and construction-related revenue rose by 4pc to $352mn. Crude-by-rail revenue rose on higher rates and increased fuel surcharge collections.
Fourth quarter profits were skewed by the Tax Cuts and Jobs Act of 2017, which boosted 2017 revenue. Excluding the one-time impact, profit jumped sharply, rising by 44pc to $702mn compared with $486mn in fourth quarter 2017.
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- On January 25, 2019