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Coal shipments dropped amid weaker natural gas prices

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Mar. 14 2015, Updated 10:06 p.m. ET

The EIA’s coal production estimates

Every week, the EIA (U.S. Energy Information Administration) publishes shipments based on coal railcar loadings. Coal is an important commodity for railroad companies—like Union Pacific (UNP) and CSX Corp. (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 under-performance and competition from other commodities. The report is published with a one-week lag. The current report is for the week ending February 20.

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Coal shipments drop substantially

According to EIA estimates, during the week ending February 20, US coal shipments came in at 16.5 million tons. This was substantially lower than the 19.2 million tons during the week ending February 13. Shipments were higher than 19 million tons during the same week in 2014. The shipments during the week correspond to 96,096 railcars.

Impact on producers

Weekly coal shipment data can be misleading. It can be distorted by factors like unavailable railcars, 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 Resources (ANR), Arch Coal (ACI), and Cloud Peak Energy (CLD). All of the major coal producers are part of the iShares Russell 3000 ETF (IWV).

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