Rail Traffic is Soaring Despite Drop in Coal Shipments

Total N. American rail traffic rose last week to 663k cars despite another fall in coal shipments. We have documented the “why” as to coal’s decline before, the massive switch to natural gas for electric generation. For proof simply look at January’s data from the EIA, we see the YOY collapse in coal and a corresponding rise in Natty for electric generation (full report here):

Capture2113 624x330 Rail Traffic and The Coal Effect


Since gas is transported by pipeline and coal by railroad, the weakness in the data is not due to an economic slowdown but by a shift in fuel and and way it is transported. In reality, all other categories of rail traffic, the “what is being hauled” sit at or above multi-year highs telling us the economy is still improving.

To see the effect of coal, I have graphed shipments from 2010 to now:

Capture494 624x269 Rail Traffic and The Coal Effect

Notice the disconnect from ’10-’11 to today through 13 weeks.

Here is the chart on total rail traffic.  Had coal traffic be even near last year’s numbers total carload would be well ahead of last years numbers.  So, while we may start to see some weakness from the rial companies due to to collapse in coal shipments, this in no way should lead one to correlate that to overall economic weakness.

Capture1172 624x283 Rail Traffic and The Coal Effect

By Todd Sullivan of Value Plays……

About the Author

Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis. His blog features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and is a RealMoney.com contributor. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”.