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Coal Shipments Decline Amid Weaker Natural Gas Prices

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The EIA’s coal production estimates

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

Coal producers mine coal on demand. As a result, the EIA’s shipment estimates mirror production. Shipments are a function of demand and other factors—like rail underperformance and competition from other commodities. The report is published with 1 week’s lag. The current report is for the week ending February 27.

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Coal shipments drop substantially

According to EIA estimates, during the week ended February 27, US coal shipments increased to 17.1 million tons—compared to 16.5 million tons during the week ended February 20. Out of the total shipments, 7.1 million tons were recorded in the east while the remaining 10 million tons was recorded in the west. The shipments during the week correspond to 98,521 railcars.

Impact on producers

Weekly coal shipment data can be misleading. It can be distorted by factors like railcar unavailability, bad weather, and supply issues—apart from 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 (KOL) like Peabody Energy (BTU), Alpha Natural (ANR), Arch Coal (ACI), and Cloud Peak Energy (CLD).

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