uploads/2015/02/Part-7-coal-shipments1.jpg

Rising coal shipments hint at an uptrend

By

Updated

Coal production estimates

Every week, the EIA (U.S. Energy Information Administration) publishes information related to shipments based on coal railcar loadings. Coal is an important commodity for railroad companies such as Union Pacific (UNP) and CSX (CSX). Yet coal’s importance is decreasing due to the emergence of shale oil. It’s also slipping because of competition from other commodities.

Coal producers mine coal on demand. So the EIA’s estimated shipment data mirror production. Shipments are a function of demand and other factors such as rail underperformance and competition.

Article continues below advertisement

Coal shipments continue the uptrend

According to EIA estimates, during the week ending February 13, US coal shipments came in at 19.2 million tons, up from 18.1 million tons during the week ending February 6. Shipments were greater than the 19.1 million tons reported for the same week in 2014. The shipments during the week correspond to 111,644 railcars.

Impact on producers

Weekly coal shipment data can be misleading. It can be distorted by factors such as the unavailability of railcars, bad weather, and supply issues, as well as genuine demand-side issues. A sustained increase or decrease in coal shipments over a few weeks—compared to the previous year—is a positive or negative indicator for coal producers such as Peabody Energy (BTU), Alpha Natural (ANR), Arch Coal (ACI), and Cloud Peak Energy (CLD). All major coal companies are part of the iShares Russell 3000 ETF (IWV).

Advertisement

More From Market Realist