Rail Traffic Up Coal Continues Its Decline

Total N. American rail traffic came in at 655k cars last week up from last weeks 641k. Despite the rise, coal once again fell to its lowest level in over two years (excluding Holiday weeks). Had coal been closer to its averages for the proceeding two years, we would have added another 20-30k cars to the tally. While coal is at multi-year lows, autos are at multi-year highs. Forest products, chemicals also saw both month over month and year over year gains in volume.

It appears the coal story is very real and due to the collapse of natural gas prices. Because of that we have to expect this trend to continue and thus a simple “total cars” look at the rail figures just isn’t going to get the job done. All categories experience occasional declines in volumes for various reason but when one of the largest categories, coal, sees declines 15% to 25% on an ongoing basis we have to dig deeper each week.

I imagine we will start to hear those will bearish proclivities proclaim the decline in coal is recessionary. It isn’t. We are seeing record natural gas usage and this is despite one of the most mild winters on record. That means the utilities that are able to are rushing to switch from coal to gas while gas is at record low prices. Pretty simple and reasonable. Since coal is shipped by rail and gas by pipeline, hence the decrease in rail traffic. Be very aware of those who try to make it into anything else.

Here is the chart:

Rail Traffic Up Coal Continues Its Decline


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”.