Coal Production Rebounded in Week Ended November 4

Weekly coal production

The EIA (U.S. Energy Information Administration) has published its coal shipment report for the week ended November 3, 2017. Coal is a key commodity for railroad companies such as Genesee & Wyoming (GWR) and Kansas City Southern (KSU). The US coal production report each week is based on railcar loadings. The week ended November 3 witnessed a rise of 3.9% in coal production, from 14.5 mmst (million short tons) in the previous week to 15.0 mmst. However, it saw a fall of 6.7% in production on a YoY (year-over-year) basis.

Coal Production Rebounded in Week Ended November 4

Coal production from all regions is expected to increase. The Appalachian region is expected to produce ~3.8 million short tons of total shipments, a ~4.4% rise from the previous week. The Interior region is estimated to be ~2.8 million short tons, a ~5.1% rise, while the Western region is estimated to source ~8.5 million short tons of the total shipments.

Is coal shipment a significant parameter? 

The level of demand for coal is a key driver for the volume of coal mined by coal (KOL) producers. Competition from cheaper fossil fuels and railcar accessibility plays a vital role in coal shipments as well. So coal production and shipments mirror each other.

Since railcar availability is a driver for coal shipments, railway developments could positively impact coal producers Peabody Energy (BTU) and Cloud Peak Energy (CLD) that have mines in the Powder River Basin.

Since unfavorable weather, railcar accessibility, and supply-related hindrance could lead to short-term shipment variances, it’s wise to consider more than just weekly shipments because the conclusions may be misleading.

In the next part, we’ll take a look at coal prices by region.