Has coal been dethroned?

For the general public, the switch by utilities from coal to cheaper natural gas should be beneficial — lower energy costs and improved air quality through fewer emissions.

But if you look at it strictly from a business standpoint, the move becomes more complex. U.S. coal output has dropped about 20 percent since 2007, with most of the decline in Appalachian coal. Railroads that haul Appalachian coal have seen similar declines in coal loadings, and barge companies that move coal have also suffered. Export coal shipments through the Gulf are also down.

Operators such as AEP River Operations and American Commercial Lines have taken a hit. AEP lost money in the first half of the year mainly due to weak coal and grain demand. AEP’s parent company expects to close 28 power units from Virginia to Oklahoma from early last year through 2016. This represents about 28 percent of its coal-fired generation.

ACL, which moves Powder River Basin coal through St. Louis, said that April and May coal shipments on the inland waterways were the lowest back-to-back months since 2009.

But these barge operators also move other cargoes, and most have tight controls on costs and should not see a big effect on their bottom lines. With recent coal price cuts, coal production volume has probably stabilized for now and may even increase.

One of our columnists, Kevin Horn, says that barge companies will take some short-term hits to their bottom lines because of the decline in coal shipments, but nothing like the hit that many coal company investors will take. Coal stocks have dropped precipitously since 2008 along with coal output. Investors who purchased coal issues when they were trading at 10 to 20 times present valuations are now on the hook for a big hit. For example, Arch Coal was over $55 a share in 2008. It closed on Aug. 12 at just $4.51. Peabody Energy hit $72 in 2011. On Aug. 12 it closed at $17.78.

Those kinds of negative returns will test the fortitude of even the heartiest of investors.

About the author

David Krapf

David Krapf has been editor of WorkBoat, the nation’s leading trade magazine for the inland and coastal waterways industry, since 1999. He is responsible for overseeing the editorial direction of the publication. Krapf has been in the publishing industry since 1987, beginning as a reporter and editor with daily and weekly newspapers in the Houston area. He also was the editor of a transportation industry daily in New Orleans before joining WorkBoat as a contributing editor in 1992. He has been covering the transportation industry since 1989, and has a degree in business administration from the State University of New York at Oswego, and also studied journalism at the University of Houston.

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