Monday, May 11, 2015

Why Fewer Coal Trains Rumble Along the James River

A global slump in coal demand is to blame.

Posted By on Mon, May 11, 2015 at 11:56 AM

click to enlarge train_bridge.jpg

If you’re frolicking on the banks of the James River in Richmond these days, you may notice that there are fewer coal trains rumbling along the river’s north bank and then across elevated tracks downtown.

That’s because export demand for coal has dropped sharply. There are fewer coal trains and fewer ships calling at Hampton Roads to take coal from western Virginia, West Virginia and Kentucky overseas or to U.S. domestic buyers.

During the first four months of 2015, coal exports from Hampton Roads were down by nearly a third compared with the same period in 2014. Three coal terminals in Tidewater exported 11 million tons compared with 16.2 million tons for the period in 2014.

It's hurting railroads. CSX, the railroad that runs along the James River, expects a five-percent drop in coal shipments this year.

Norfolk Southern, which hauls coal just south of Petersburg, reported net income for the first quarter of $310 million, down 16 percent from $368 million from the first quarter in 2014. Much of that has to do with drops in coal demand.

Coal is out of favor for several reasons. The fracking boom for natural gas has created a glut and reduced prices so power companies are switching to it. Central Appalachian coal of the type that moves through Richmond is among the best in the world in quality, but is expensive and expensive to mine.

Another reason is that federal regulations, both existing and proposed, discourage the use of coal for generating electricity because it's polluting and is a major contributor to carbon dioxide and global warming.

Much of the coal that moves on the Norfolk Southern line and some on CSX is metallurgical product used to make steel. Some of it ended up in Asia, notably China, where it's used by steel mills. But China is going through an economic slowdown, weakening demand for coal.

Demand for coal, however, is cyclical, and will come back to some extent, especially for steel-making.

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