London (Platts)--30Nov2012/1124 am EST/1624 GMT
The CSX and Norfolk Southern railroads are both cutting rates by "around 15%" to help miners and traders sell US coking coal into destinations as far as China, according to market sources. The sources added that the main rail operators into Hampton Roads and Baltimore are giving up a portion of their fees to aid new spot fixtures on a case by case basis. This is after demand for US coking coal in traditional and emerging markets such as Europe, Brazil, India and China waned. Typically, business involving new trials and inaugural shipments of met products targeted by the railroad customers are said to get help from the railroads. Rail and port loading fees are widely understood to typically be around $40-45/mt from Appalachian mines. "US miners are under big pressure as demand in Europe is not as big as before so they have to look to Asia and elsewhere," a European coal buyer said. One US coal executive citing an "average 15% fall in rail tariffs" said it was "the only reason why US suppliers were selling to China at low prices." The cut in rates was given as potentially helping some US low-vol coking coals make sales in China recently. But with delivered prices and offers for certain coals heard in November at around $150/mt CFR China and below, participants in the US mining industry say these represent short-term sales to monetize inventory before year-end, and unsustainable as the price at the mine is below cost. The sales to China from the US were described by one miner as "dumping material." CSX's chief financial officer Fredrick Eliasson said Wednesday the operator had been lowering fees for metallurgical coal producers to keep their product "competitive in the worldwide market." He would not specify by how much but the reduction comes on top of a 12-13% discount in tariff-based pricing it offered to met coal producers in the second quarter, Eliasson said on a conference call. Eliasson said export coal volumes for the quarter on a year-over-year basis are down approximately 5% through last week, narrowing from a 20% decline the company reported at the end of the third quarter. The railroad is carrying roughly an equal amount of met and thermal coal. Last year at this time, the mix was closer to 65% met coal and 35% thermal coal, said Eliasson. As for Norfolk Southern, the Virginia-based operator suffered a 28% drop in September for export coal shipments, and the company blamed weaker European and Chinese economic activity for mine closures and lighter traffic as it reported third quarter 2012 earnings. The company was not immediately able to comment when contacted on Friday. Another European mill coal buyer said higher fees to aid rail investments a few years ago had been hampering business now after coal prices fell. European mills earlier this year had said they were pushing coal suppliers to get cuts in rail fees to help win sales.--David Braid, david_braid@platts.com; Hector Forster, hector_forster@platts.com; Andrew Moore, andrew_moore@platts.com--Edited by James Leech, james_leech@platts.comSimilar stories appear in Platts SBB Steel Markets Daily. See more information at http://www.platts.com/Products/steelmarketsdaily