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Coal Shipments Continue to Rise Marginally

Mayur Sontakke, FRM

Coal Stocks Rise and Utilities Fall during Bad Week for S&P 500

(Continued from Prior Part)

Coal shipments 

According to the EIA (U.S. Energy Information Administration) estimates, US coal shipments increased marginally to 18.3 million tons during the week ended August 14 in comparison to 18.2 million tons for the week ended August 7. Out of the total shipments, 7.4 million tons came from the East, while the remaining 10.9 million tons came from the West. The shipments correspond to 106,339 railcar loadings, crossing the 100,000 mark for the fourth week in a row.

Why is this indicator important?

Every week the EIA publishes shipment data based on coal railcar loadings. Coal is an important commodity for railroad companies that ship coal, like Union Pacific (UNP) and CSX (CSX). However, coal’s importance in freight is falling due to the emergence of shale oil. It’s also falling because of competition from other commodities. We looked at the relationship between crude oil and coal in the third part of this series.

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) such as 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 such as rail availability and competition from other commodities. So weekly coal shipment data can be misleading. Apart from genuine demand-side issues, factors like the unavailability of railcars, bad weather, and supply issues can distort the data.

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