The boom is over for river coal

Fifty-five percent of something is a lot, and there is a lot of coal traffic on the Ohio River system. In fact, coal makes up 55 percent of the system’s total barge tonnage.

Looking at today’s coal and competing energy markets says a lot about the future of coal’s barge-tonnage domination on the Ohio. U.S. annual coal production east of the Mississippi River essentially stayed put at around 600 million tons until the late 1980s. It has since declined to about 500 million tons in this decade. In the meantime, Western coal production has risen from nearly nothing in 1970 to about 700 million tons annually with more growth projected.

For transportation of domestic Eastern coal for power generation, it’s barge first and rail second. For domestic Western coal production for utilities, it’s rail, with rail-barge a distant second. So, Western coal’s recent dominance over Eastern coal markets has affected what was a major growth area for hopper barge traffic.

Today, natural gas prices are trading well below 2006 levels – about 50 percent lower. Conversely, river coal is trading right around where it was in 2006. That makes natural gas considerably less expensive when compared to 2006 coal prices. Moreover, there is now a glut of gas from major new domestic discoveries in Texas, Louisiana and Pennsylvania. Cheaper domestic gas prices are also supported by a glut of low-cost gas imports.

As a result, the coal spot market has been dead. Coal producers are living off existing utility contracts that will soon come up for renewal. Utilities with dual capabilities for gas and coal will have strong bargaining positions. Some have already switched to gas.

At different pricing scenarios, the market share of river coal and natural gas can be projected. Unless river coal gets a lot cheaper, it’s expected that inland waterways coal traffic will continue to decline, and coal traffic on the Ohio River is likely to dip well below it’s 55 percent barge tonnage mark.

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Workboat Staff

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