Higher US gas prices supporting coal shipments to utilities: rail exec

Washington (Platts)--13 Aug 2013 354 pm EDT/1954 GMT

While US coal exports are likely to weaken over the remainder of 2013, higher natural gas prices have helped to support domestic shipments of thermal coal to electric utilities, an executive with Norfolk Southern railroad said Tuesday.

Speaking via webcast from the Jefferies Global Industrials Conference in New York, Mark Manion, the railroad's chief operating officer, said sluggish European demand and slowing shipments to Asia means exports of both thermal and metallurgical coal will decrease in the third and fourth quarter of the year when compared with the first half of the year.

The Norfolk, Virginia-based railroad exported 77,200 coal carloads in the first quarter of the year and 67,400 coal carloads in Q2, according to quarterly filings.

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The railroad primarily exports coal from terminals in Norfolk and Baltimore.

Despite current weakness, Manion said the railroad remains bullish on thermal coal exports over the longer term.

"We know there are lots of utility plants overseas, particularly in Asia, so where we see an opportunity to handle that business, we'll do it," said Manion.

He said that although the railroad's domestic utility franchise continues to face headwinds from cheap natural gas prices and weak electricity demand "firming natural gas prices are having a positive impact on utility coal."

While Manion said the stronger gas prices are helping to push down utility coal stockpiles, he did not provide any further specifics.

The railroad's second-quarter coal volumes are down 5% compared with the year-ago quarter, said Manion.

Illustrating the recent challenges faced by coal, Manion said the railroad's coal volumes have fallen from 23% of its overall traffic in 2010 to 19% for the first six months of this year.

--Andrew Moore,
--Edited by Jeff Barber,

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