Coal shipments are flat despite the rise in electricity generation
Will coal producers benefit from cooler temperatures? (Part 6 of 6)
The EIA’s coal production estimates
Every week, the EIA (US Energy Information Administration) publishes coal shipments based on coal rail car 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 underperformance and competition from other commodities.
Coal shipments remained flat
In the week ending January 2, coal shipments across the US remained flat at 17.6 million tons. Eastern shipments gained marginally. Western shipments dropped marginally as cold weather started engulfing the eastern part of the US.
It’s important to note that the production data is for the week ending January 2. The electricity generation data discussed in the previous part of this series is for the week ending January 9.
Since electricity generation for the week ending January 9 increased, it will be interesting to see how the shipment data reacts.
Impact on producers
While electricity generation in the week ending January 2 increased, coal shipments remained somewhat flat. It can be concluded that natural gas may have snatched some market share from coal during that week. However, there was a substantial increase in electricity generation in the week ending January 9. We’re waiting for the shipment data.
Low natural gas prices put pressure on coal. The prices even put pressure on Powder River Basin, or PRB, coal producers (KOL)—like Peabody Energy (BTU) and Cloud Peak Energy (CLD). The producers are facing the heat.
During the week ending January 2, eastern coal prices remained flat. Prices were flat for the Appalachian Basin and the Illinois Basin. The PRB’s prices dropped $0.40 to $12.20 per ton.
Please visit Market Realist’s Coal page for more analysis and the latest updates.
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