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A protracted slump in coal demand could continue to hit results for railroad companies as power...

A protracted slump in coal demand could continue to hit results for railroad companies as power plants increasingly shift to natural gas in the U.S. A warm winter already left stockpiles high before low natural gas prices reinforced the trend away from coal. In the line of fire: CSX (CSX -0.1%), Kansas City Southern (KSU -0.5%), Union Pacific (UNP +0.3%), Norfolk Southern (NSC -0.1%) - and to a lesser degree Berkshire Hathaway (BRK.A, BRK.A) with its Burlington Northern holding.
Comments (6)
  • NG may hold at these levels as investors pile in buying the power plant switch story, but coal definitely looks like it has room to drop.

     

    As coal drops in price it will become more attractive to powerplants, that's pretty much all there is to it.

     

    Energy in general is in a longer term downtrend.

     

    http://bit.ly/Lyhpeb
    18 Jul 2012, 11:55 AM Reply Like
  • Trains are needed to transport coal from where it is dug out of the ground to where it is needed.

     

    Pop Quiz:

     

    Where is coal dug out of the ground?

     

    Where is it needed?

     

    Do we need trains to transport coal?

     

    If you have CSX in your portfolio, you pass the test.

     

    Class dismissed.
    18 Jul 2012, 12:08 PM Reply Like
  • The rails will do what they did in 2007. They will park locomotives and rail cars and reduce the number of trains per week. This will reduce income and total profit, but the net profit % will remain the same, and that is what is really important.
    18 Jul 2012, 12:12 PM Reply Like
  • NG prices have rebounded significantly from their lows, so coal has probably bottomed, as well. However, the current US policy is very anti-coal, so even if the price of natural gas were to double, it's not as though coal would suddenly regain its old status as a fuel. Instead, it is being exported. That trend will continue, as coal producers look to expand port capability.

     

    Peabody just inked a deal with Kinder Morgan to export out of the gulf, and ports would be expanding on the west coast if it weren't for environmentalists standing in the way. I think that eventually a state that needs the revenue will succumb, and whomever owns the rail to that port will do well. At the moment, their are various proposals on the table for Washington and Oregon.

     

    By the way, if Romney wins, the game changes considerably. Not that he is in the coal industry's pocket, but Obama has stated plainly that he wants to coal industry to die.
    19 Jul 2012, 02:37 AM Reply Like
  • You really think coal has bottomed?

     

    I don't.

     

    Here's one chart to look at if you care to re-examine that position:

     

    http://bit.ly/ML8DEU

     

    I see significant downside headroom for coal in it, maybe you see something I don't.
    19 Jul 2012, 08:12 AM Reply Like
  • Q1 results already showed that railway companies are not hurt by falling coal demand at all.

     

    Besides, coal demand has already stabilized in recent months as NG price has risen. This article is pure junk it comes of making investing decisions.
    23 Jul 2012, 03:36 AM Reply Like
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