Rail Traffic Volumes Tumble As Coal Stockpiles Soar At Record Rate

Tyler Durden's picture

For the first two months of 2016, it seemed as if a modest, if stable, rebound was finally taking place among one of the hardest hit transportation sectors of 2015, rails. Alas, like virtually everything else, this too has proven to be nothing more than a dead cat coming back to life and getting run over by a train.

As RBC writes in a recent notes, rail traffic volume declines have again intensified. "On a Y/Y basis, traffic slowed by -14% Y/Y for week 11 as all rails posted stiff volume declines and on a segment basis only Motor Vehicles carloads were higher (+7% Y/Y). Since week 7 when volumes grew by +4% Y/Y, the sharpest traffic decline has come in Intermodal carloads (from growth of +17% Y/Y for week 7 to a -12% Y/Y decline last week). Coal headwinds have also intensified in recent weeks and the segment remains the major laggard so far this quarter (-30% Y/Y QTD)."

Visually:

 

And while we have touched on some of the primary catalysts for the ongoing decline in railroad traffic, chief among which the drop off in global trade and the plunge in oil transportation, a third - just as important factor - has been the situation involving US coal power plants, where as the EIA writes, "coal stockpiles at electric generating facilities totaled 197 million tons at the end of 2015, the highest level since June 2012 and the highest year-end inventories in at least 25 years."

 

The full details from EIA's Today in Energy, by Tim Shear:

As coal stockpiles at power plants rise, shippers are reducing coal railcar loadings

 Source: U.S. Energy Information Administration, Electric Power Monthly and Association of American Railroads

Coal stockpiles at electric generating facilities totaled 197 million tons at the end of 2015, the highest level since June 2012 and the highest year-end inventories in at least 25 years. More than 40 million tons of coal were added to stockpiles at electric generating facilities from September through December, the largest build during that timespan in at least 15 years. In addition to relatively low overall electricity generation, largely attributable to the warmest winter on record, coal-fired electricity has recently been losing market share to electricity produced using natural gas and renewable resources.

Source: U.S. Energy Information Administration, Electric Power Monthly

Coal stockpiles typically follow a seasonal pattern in which stocks build during the lower electricity demand periods of the spring and fall and then get drawn down during periods of higher electricity demand in the summer and winter. In 2015, the stockpile build from August to December was 40 million tons, far higher than the 11 million ton average stockpile build for these months over 2001-14. Coal stockpiles typically decrease in December, averaging a roughly 3 million ton decline for the month over 2001-14. However, stockpiles this December increased by more than 8 million tons.

As stockpiles grew toward the end of 2015, shipments of coal by rail fell. Weekly coal railcar loadings averaged nearly 94,000 carloads per week from September through December 2015, 22% below average loadings for that time of year over the previous five years. Railcar loadings were even lower in the first months of 2016. Through February, weekly coal railcar loadings averaged slightly more than 75,000 carloads, 35% below the previous five-year average.

Source: U.S. Energy Information Administration, Electric Power Monthly

* * *

What is most surprising is that the near record high coal stockpile levels at the end of 2015 come despite a reduction in coal-fired generation capacity. From 2010 to 2015, total U.S. coal generating capacity declined 10%, falling by nearly 33 gigawatts (GW) to 285 GW. One way of measuring coal stockpiles while accounting for the overall change in generating capacity is to calculate days of burn. This calculation considers the current stockpile level at each generator and its estimated consumption (burn) rates in coming months, based on the average consumption rates for those months over the past three years. This measure approximates how many days the generator could run at historical levels before depleting its existing stockpile.

This means that just as oil inventories hit all time highs at the end of 2015 and into 2016, the same was taking place at US power plant coal stockpiles; worse, since much electricity production has been shifted to other, cleaner forms of electric generation, the excess coal capacity in the market is so vast, that it will take pervasive, acute bankruptcies to reset some semblance of equilibrium. It also means that the Peabody bankruptcy will be only the start, and that tens of thousands more hard-working Americans will soon lose their jobs.

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Hohum's picture

Upside: Parents can threaten their children with coal in the stocking and make good on it.

Clockwork Orange's picture

Or we could throw it at Hitlary at organized protests designed to disrupt her rallies. 

Check that, that would be thuggish.  We'll have to give it to Bernie's crew.  They'll take care of it.

CheapBastard's picture
U.S. has lost 5 million manufacturing jobs since 2000

 

http://money.cnn.com/2016/03/29/news/economy/us-manufacturing-jobs/index...

 

The Clinton-Bush-Obama Axis of American Destruction.

johngaltfla's picture

FWIW, I'm starting to see the rail sidings pile up with cars again; just like 2008.

But don't worry, the same morons in 08 saying "we're not in a recession" then as they are doing again now.

knukles's picture

So we got seroius stockplies of energy products either due to "over production" or decreasing demand.
Sounds like a healthy environment out there.

BuddyEffed's picture

Stealth chronic underemployment will curtail demand and can lead to oversupply in commodities without an increase in their production rate and maybe even with a small decrease in production rate.

Boris Badenov's picture

Did I miss the Price of Coal Chart? Did a drop in price coincide with the stockpile mode?

Quebecguy's picture

What kind of data is the Fed dependant on, anyway? 

brada1013567's picture

The S&P 500

 

under 2100 = dovish

 

over 2200 = hawkish

 

silverer's picture

Don't worry about coal. They have legislation for that.

JamaicaJim's picture

Classically, boys and girls, this data would portend a down turn in the stock market.

But that was long ago....and now....it's more data that the now RIGGED CASINO, ON SCRIPT......ignores.

<walks off in disgust>

Kirk2NCC1701's picture

Buffet better back bombastic billionaire builder -- Trump.

If he wants to see coal make a comeback.

Grimaldus's picture

Sure would like to see 50 pound sacks of anthracite coal available around here for cheep. I'd buy a metric butt ton.

 

 

 

Grimaldus

Fullthrottle's picture

Obamas war on coal is working better than he ever dreamed. 

ejmoosa's picture

Have you seen the earnings in the electricity sector?  They indicate we are in a recession.

Wile-E-Coyote's picture

Everyone stockpiling you would almost think there was going to be a war or something.

Dre4dwolf's picture

Systemic collapse is starting.

I wonder what nations will emerge victorious out of the ashes this time around.