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Power Systems Engineer
  • Coal Is Making A Comeback And The Rail Traffic Proves It 23 comments
    Jul 17, 2012 5:39 PM | about stocks: ANR, BTU, CSX, CLDQ, WLT

    For months now many people have been running around screaming that coal is dead and natural gas has permanently taken a large chunk of its electricity market share. I will admit these claims are true that coal and gas generation were roughly equal for the early spring months of 2012. This was largely due to an extraordinarily warm winter that sent natural gas prices plunging to record lows and left coal utilities with record coal inventories.

    Now we are entering a new stage where natural gas surplus is rapidly being eroded away by record low weekly gas injections into storage and we have started the summer off with a record setting heat wave and plenty of more heat on tap for the coming weeks ahead. Most have been focusing their time studying the supply and demand metrics of the natural gas market. This is incredibly hard to do, due to a large amount of industry variables. One can draw a much clearer conclusion as far as what is going on with coal to gas switching by looking at the weekly coal rail car loadings.

    Below I have graphed the week/week year prior change in rail car coal loadings for all major U.S rail lines going back to december 2011. This information is available on the Association of American Railroads website (www.aar.org/AAR/NewsAndEvents/Freight-Ra...)

    (click to enlarge)

    Some quick and clear conclusions can be made from this data.

    • Coal to gas switching was temporary and opportunistic.
    • Coal demand has rapidly increased since April. With rail car loadings now approaching historically normal levels.

    This has major implications for stocks such as (NYSE:CLD), (NYSE:WLT), (NYSE:ANR), (NYSE:BTU) and other coal producers and also rail lines such as (NYSE:CSX).

    These companies will be reporting Q2 results this month and early next month. Expect to hear good news as far as coal demand returning to normal levels.

    One side note: Coal exports have rapidly increased this year as well. This may be playing into the upward slope of the graph shown above. Overall however, the above chart is extremely bullish for coal producers and rail lines....

    Disclosure: I am long ANR, BTU.

    Themes: Coal, Rail Stocks: ANR, BTU, CSX, CLDQ, WLT
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Comments (23)
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  • Mark Anthony
    , contributor
    Comments (3601) | Send Message
     
    It's very good that you were able to dig out the US rail car data. I shall look at the data myself when I have time:
    http://bit.ly/MrEugf
    17 Jul 2012, 06:03 PM Reply Like
  • Mad330
    , contributor
    Comments (87) | Send Message
     
    your not long on JRCC anymore?
    17 Jul 2012, 07:07 PM Reply Like
  • Titan06
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » never was, i dont like JRCC. i think ANR and BTU are two very good coal stocks to play the rebound in coal.
    17 Jul 2012, 07:41 PM Reply Like
  • Mercy Jimenez
    , contributor
    Comments (2140) | Send Message
     
    Titan,
    Very much appreciate your analytics on the weekly rail car coal loadings. This is very timely information as we enter earnings season.
    Many thanks,
    mj

     

    Disclosure: Long BTU
    17 Jul 2012, 07:50 PM Reply Like
  • Jtricks
    , contributor
    Comments (127) | Send Message
     
    Nice work bro, good graph!

     

    I think the percentages in your chart show something akin to a loss of bleeding more than a bullish case for now though. But hey, I'll take it! Stopping the bleeding is the first step toward a rebound haha.
    17 Jul 2012, 08:04 PM Reply Like
  • Titan06
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » im going to listen to the CSX conference call tommorow, i expect to hear good things as far as coal shipments increasing.

     

    this may act as a catalyst for coal stocks
    17 Jul 2012, 08:08 PM Reply Like
  • Titan06
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » by the way this was out yesterday..

     

    IS THE WORST OVER FOR COAL AND HOUSING?

     

    Coal rail shipments are now headed upward, with utilities burning off stockpiles to produce electricity for air conditioning during this steamy summer, analysts agree.

     

    "Coal looks like it has hit the bottom and is starting to come back up," said Koraleski.

     

    http://yhoo.it/NzPGKT
    17 Jul 2012, 08:11 PM Reply Like
  • biscuits414
    , contributor
    Comments (20) | Send Message
     
    Nice work, Titan! I continue to be amazed at the recent beating ANR is taking despite positive developments like this. Rising nat gas prices, 13 year low rig count, very hot summer, decent 7.6% GDP out of China, China taking measures to stimulate slowing economy, increased European demand of U.S. coal, numerous coal analysts buy recommendations of ANR from a pure valuation/bargain standpoint etc..all of these are positive recent developments yet ANR hits a new 52 week low of $6.53 today...Will it drop another 50% when some prominent figure rehashes for the millionth time that we had a warm winter and a natural gas glut?...We need institutional buyers to step up to the plate and buy. Not sure why they haven't yet.
    17 Jul 2012, 08:53 PM Reply Like
  • lostalloncoal
    , contributor
    Comments (373) | Send Message
     
    May be they think cry baby Obama idiot will win again. Thats why.
    17 Jul 2012, 09:22 PM Reply Like
  • Titan06
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » soon or later these names will turn up, and they will move quickly. Im adding to positions in ANR and BTU when i can.
    18 Jul 2012, 06:23 AM Reply Like
  • dividend_growth
    , contributor
    Comments (2895) | Send Message
     
    PRB is fine. Appalachian coal is not.

     

    That's why ANR and JRCC are doomed.
    18 Jul 2012, 02:20 AM Reply Like
  • Titan06
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » ANR is more than half met coal...... and 15% PRB

     

    they will be just fine

     

    and coal prices are moving up

     

    http://bit.ly/rrHh3e
    18 Jul 2012, 06:27 AM Reply Like
  • lostalloncoal
    , contributor
    Comments (373) | Send Message
     
    Same with JRCC. 2012 Thermal sold out. Met coal left. They even shipped to India.
    18 Jul 2012, 01:32 PM Reply Like
  • Christopher Wallace
    , contributor
    Comments (1074) | Send Message
     
    I agree with your point "Now we are entering a new stage where natural gas surplus is rapidly being eroded away by record low weekly gas injections into storage" and in fact published an article on that at http://seekingalpha.co...
    I got quite excited about the chart you created. But then I got to thinking, is the uptick in rail shipments since April a seasonal thing or is it the harbinger of new and better days for coal? Could you go back a year or two to see if it is seasonal? I don't have your data but I found this data set which seems to indicate a seasonal uptick in some rail shipments begins each April : http://bit.ly/a2h8N6. I can't say for sure if it truly applies to the data you have graphed, and I'd appreciate any comment you might have. Thanks.
    18 Jul 2012, 06:16 PM Reply Like
  • Titan06
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » there is some seasonality to coal loadings

     

    build up stockpile during shoulder months and burn down inventory during summer and winter.

     

    but forget all of that, what my chart is showing is that coal is now being bought and shipped at levels that are typical to 2011 before natural gas collapsed.

     

    if coal was not being bought we would still see a reduced number on the week/week prior comparison. it would still be -16% roughly. But now it is now near 0% .

     

    people are starting to buy coal again at normal volumes...this is very bullish for coal.
    18 Jul 2012, 06:28 PM Reply Like
  • Christopher Wallace
    , contributor
    Comments (1074) | Send Message
     
    I think I understand it now: shipments stopped declining YoY in weeks 14 and 15 at -16% and are now almost even YoY? Seasonality is factored in because it is YoY?
    18 Jul 2012, 06:49 PM Reply Like
  • Titan06
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » its week over week year prior. you can look at the cumulative numbers on the association of American railroads website. you will see that coal shipments are -14% so far for the first 27 weeks of the year compared to the first 27 weeks last year, this number is not increasing because shipments are now on par with last year.
    18 Jul 2012, 07:06 PM Reply Like
  • winomaster
    , contributor
    Comments (25) | Send Message
     
    If more coal is being shipped because its price has crashed along with the price of nat gas...that would be an unpromising recovery in shipments. I would suggest that changes in the coal_price_are more relevant.

     

    You could make a bullish case for nat gas in that shipments are hitting new highs. But, record consumption at record low prices is just not that bullish an indicator.

     

    The critical question here: What is happening to the_price_of coal.
    19 Jul 2012, 05:44 AM Reply Like
  • Titan06
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » it is going up beacause demand is coming back as shown in the rail shipments. check EIA website
    19 Jul 2012, 06:19 AM Reply Like
  • Titan06
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » update

     

    http://seekingalpha.co...
    19 Jul 2012, 06:26 PM Reply Like
  • Jack Wildcat
    , contributor
    Comments (171) | Send Message
     
    Long ACI. I believe we won't see insider buying until after earnings, expect them to be bad and then as long as natural gas holds the coal market will start ascending upwards. Buy on the dips.
    20 Jul 2012, 10:58 AM Reply Like
  • winomaster
    , contributor
    Comments (25) | Send Message
     
    The increase in coal shipments is no reflection of a repudiation of nat gas use. With this summers heat one would imagine the power plants are running both types of generating capacity flat out. But if nat gas still has a cost advantage, they would max out that capacity first before deciding how much coal plant needed to be brought on line.

     

    So, by my thinking the increased coal shipments are a product of a hot summer and no sea change in the use of coal. As we go into fall, coal fired production capacity will be the first to be idled...assuming nat gas pricing resumes its previous advantage.
    26 Jul 2012, 06:11 AM Reply Like
  • Titan06
    , contributor
    Comments (303) | Send Message
     
    Author’s reply » and if nat gas is 4$ by fall?

     

    we are half way there
    26 Jul 2012, 06:32 AM Reply Like
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