Why Coal Production Declined in Week Ended November 25
Weekly coal production
Coal is a critical commodity for railway companies such as Union Pacific (UNP) and Kansas City Southern (KSU). On November 30, 2017, the EIA (U.S. Energy Information Administration) reported coal shipment estimates for the week of November 18–25, 2017. The weekly report on US coal production is determined by rail car loadings. For the week ended November 25, coal production fell sharply to 14.1 mmst (million short tons) from 14.9 mmst in the previous week. On a week-over-week basis, coal production for November 25 fell 5.6%, and on a year-over-year basis, it fell 13.9%.
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Coal production from the three regions fell sharply during the week of November 18–25. About 3.5 mmst of coal was mined from the Appalachian region, which was 5.1% less than the previous week. The Interior region is estimated to have produced 2.6 mmst, which is 4.5% lower than the previous week’s estimate. The Western region sourced the remaining 8 million short tons. It was nearly 6.2% lower than the coal produced in the week ended November 18.
Is coal shipment an important parameter?
For prominent coal (KOL) companies such as Alliance Resource Partners (ARLP) and Cloud Peak Energy (CLD), the amount of coal to be drilled largely depends on the level of demand for the commodity. Coal shipments, on the other hand, are dependent on competition from cheaper non-renewable fuels and the availability of rail cars. So coal production and shipments follow each other.
Short-term shipment disparities may be created due to rail car inaccessibility, supply-related obstacles, and weather contingencies. So results obtained just by analyzing weekly details of shipments might be misleading.
In the final part, let’s look at the prices of coal from the three primary coal-producing regions.