Old King Coal is back

HAS ANYONE NOTICED the surge in coal traffic, particularly from the Powder River Basin? BNSF Railway’s loadings jumped from 3,235 cars per day the week of April 3-9 to 4,525 per day June 12-18, the most recent week reported. That’s an increase of 1,290 cars per day, or 39 percent—or if you will, 10 additional 129-car trains per day. All I can say is, WOW! What a difference 10 weeks make.

And it’s not just a BNSF thing, because in percentage terms, Union Pacific’s coal revival has been an astounding 48 percent, from 2,194 cars per day April 3-9 to 3,259 cars June 12-18. All these numbers include coke, which is a very minor element in the mix.

Heading east, the numbers are up as well, although not nearly as much. Norfolk Southern during those 10 weeks went from 2,256 to 2,588 cars per day (up 14 percent) and CSX Transportation from 1,795 to 2,010 cars (up 12 percent, or one more of Cindy Sanborn’s 200-car unit trains every day).

Lest we rejoice too much, loadings remain well below year-ago levels. BNSF would have to duplicate its April-to-June increase to reach the business level of late June 2015. UP made up two-thirds of its deficit from a year ago, but CSX only a fourth of its loss and NS about a third.

Latest data from the U.S. Energy Information Administration on utility coal stockpiles dates to March, when they were near a cyclical peak. But EIA projected they would fall sharply in months to come, and they probably have, causing electric utilities to increase their buys. This is also turning into a much hotter summer than a year ago—another stimulus to demand.

Maybe most important, natural gas has shot up in price, making it noticeably more expensive per Btu content than Powder River Basin coal and only a bit cheaper than coal from Central Appalachia. Utilities supply demand by running their least expensive power sources first, which certainly must be helping PRB coal.

Miracles in life rarely happen, and besides I’m the wrong person to turn to for predictions in the energy sector. On the other hand, trends in commodities always seem to go to extremes, so the trend we’ve seen the past 10 weeks could continue for a while. Or maybe not.—Fred W. Frailey