According to the EIA’s (U.S. Energy Information Administration) estimates, US coal shipments fell to 17.1 million tons during the week ended October 9, compared to 17.2 million tons for the week ended October 2.
Of the total shipments, 6.7 million tons came from the East, while the remaining 10.4 million tons came from the West. The shipments correspond to 98,637 railcar loadings. Railcar loadings fell below 100,000 for the first time in 12 weeks.
Why is this indicator important?
Every week, the EIA publishes shipment data based on coal rail car loadings. Coal is an important commodity for railroad companies like Union Pacific (UNP) and CSX (CSX). However, coal’s importance in freight is falling due to the emergence of shale oil. It is also falling due to competition from other commodities and the propensity of utilities (XLU) to stock coal. We looked at the relationship between crude oil and coal in Part 3.
More importantly, coal producers mine coal on demand, so coal shipments mirror production over the long term. A sustained rise or fall in coal shipments over a few weeks, compared to the previous year, is a significant indicator for coal producers (KOL) like Peabody Energy (BTU), Alliance Resource Partners (ARLP), Arch Coal (ACI), and Cloud Peak Energy (CLD).
However, there can be some deviations in the short term. Shipments are a function of demand and other factors like rail availability and competition from other commodities. So, weekly coal shipment data can be misleading. Apart from genuine demand-side issues, factors like rail cars not being available, bad weather, and supply issues can distort the data.