A Norfolk Southern Corp. executive believes the railroad will exceed its fourth-quarter guidance for coal deliveries bound for export.
"We gave guidance in the third quarter that we thought our export coal would be between 5 million [tons] and 6 million tons for the quarter. We believe now that we will exceed that," Cynthia Earhart, CFO and executive vice president of finance for Norfolk Southern, said Nov. 29 at the Credit Suisse 5th Annual Industrial Conference.
She said volumes for the railroad are up 4.8% across the board so far in the fourth quarter, led by coal, intermodal, metals and construction.
Norfolk Southern's coal operating revenue for the third quarter increased 13% year over year. An executive said at the time that the rise in revenue and volume growth was due to increased coal exports and pricing.
The railway is maintaining its fourth-quarter utility coal guidance range of between 15 million tons and 17 million tons, though shipments will be "very, very dependent on the weather, stockpiles and natural gas prices," Earhart said.
"When stockpiles are elevated, it impacts how much coal you move, obviously. The other thing will be to look at what kind of weather we're going to have ... we've gotten a slow start to winter, and we didn't really have that hot of a summer," she said, according to a transcript.
Exports boosted the coal revenue of other major railroads in the third quarter year over year.
Coal exports from Norfolk Southern's Lamberts Point facility, which mostly handles metallurgical coal, jumped 84% from 717,469 tons delivered in October 2016 to about 1.3 million tons in the recent October. Other Virginia coal export terminals saw increases in coal exports in October as well.
In response to a question about whether the railway would spin off its coal segment, Earhart said the coal network is a "pretty good business" but Norfolk Southern is "constantly looking and evaluating whether we have the right resources" and she would not take anything off the table.
Increasing international demand
During the Nov. 21 third-quarter earnings call of Navios Maritime Holdings Inc., Thomas Beney, the senior vice president of commercial affairs for Navios Corp., said demand for thermal coal in China rose in the first nine months of the year.
"Through September 2017, coal imports are up by about 8%. As we enter the winter peak season, we should experience an increase in imports as power plants stock up. China imports less than 10% of its annual coal consumption. But with the domestic coal price above import prices, the market continues to incentivize strong imports," he said.
Star Bulk Carriers Corp. CEO Petro Pappas said in a Nov. 20 earnings call that China's coal imports "have rebounded by 13.7% during the first 10 months of 2017 on the back of strong electricity demand growth," according to a transcript.
"We find it encouraging for medium-term coal imports prospects that domestic coal production growth has slowed down. Domestic production currently runs below 2014 levels, while total electricity generation during the same period has increased by approximately 15%," he said, adding that some Chinese power plants have decreased coal stocks.
