Page 63

Railroads and Coal: Looking Back and Looking Ahead By John Gray, Association of American Railroads

F

or most firms and industries, 2009 was extremely challenging. The recession meant crippled consumer demand, sharply higher unemployment, and tumbling industrial production. Few countries were immune as the recession battered economies worldwide. Not surprisingly, railroads suffered along with everyone else. Carload traffic on U.S. freight railroads in 2009 was down 16.1 percent from 2008. Intermodal traffic was down 14.1 percent in 2009 from 2008. Every major commodity category of rail traffic was down in 2009, most of them sharply. The sharp decline in rail traffic should not be surprising because railroading is a classic “derived demand” industry: demand for rail service occurs as a result of demand elsewhere in the economy for the products that railroads haul. If people and businesses are not buying and building things, then railroads are not hauling them. Chart 1

Coal is a perfect example. Chart 1 shows average weekly carloads of coal on U.S. freight railroads for each month from January 2006 through January 2010. Rail coal traffic in 2009 was holding its own until April, when it fell sharply. It has stayed down ever since. Why? Mainly because coal-fueled power plants simply stopped using as much coal. Chart 2 shows monthly coal stockpiles at power plants from 2003 through November 2009 (the most recent data available at this writing). Note the huge run-up in stockpiles since early 2009. Stockpiles exceeded 200 million tons in October and November 2009 –higher than ever before. What’s behind the increase? There are at least two major reasons. First, in the first 11 months of 2009, electricity generation was down 4.7 percent from the same time in 2008 (see Chart 3). Reduced demand for electricity, in turn, is a function of the poor economy (a Chart 2

Coal Stockpiles in the Electric Power Sector: January 2003 - November 2009

Average Weekly U.S. Rail Carloads of Coal 160,000 2008

150,000

2006

200 180

140,000

160

2007

130,000

140

2009

120

120,000 Jan. 2010

100

110,000 Jan Feb Mar Apr May Jun

Jul Aug Sep Oct Nov Dec

80 2003

Data are weekly average originations for each month, are not seasonally adjusted, exclude U.S. operations of CN and CP, and reflect revisions from original reporting. Source: AAR

Chart 3

2005

2006

2007

2008

2009

Chart 4

Average Delivered Price of Fuel for the U.S. Electric Power Industry: 1990-2009*

(Million Megawatthours)

440

(Dollars Per Million Btu)

$16

420

380

2004

Source: Energy Information Administration

U.S. Net Electricity Generation

400

(Millions of Tons)

220

$14 2008

$12 2007

360

$10 $8

340

$6

2009

320

$4

300

$2

280 Jan Feb Mar Apr May Jun Source: Energy Information Administration

american coal council

Jul

Aug Sep Oct Nov Dec

$0 Coal

Petroleum

Natural Gas

*2009 is Jan. – Oct. Source: Energy Information Administration

61

Profile for American Coal Council

American Coal Issue 1 2010  

American Coal Issue 1 2010  

Advertisement