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Despite fluctuations in sector, US coal rail shipments remain stable YOY in 2018

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Despite fluctuations in sector, US coal rail shipments remain stable YOY in 2018

Overall coal shipments along U.S. rail lines remained stable in 2018 compared to 2017 as some major factors influencing the sector carried over year to year. Carloads of coal through Dec. 29, 2018, were down 0.3% year over year to 4.4 million tons, according to the Association of American Railroads.

The coal export market surged in 2017 and 2018, driven largely by strong demand in Asian nations, helping to offset the lag in domestic demand from utilities. Eastern railroads said in November 2018 that they expect the trend to continue for thermal coal into the new year.

"If production comes online, we can absolutely see growth in our export franchise next year," Norfolk Southern Corp. Chief Marketing Officer Alan Shaw said Nov. 28, 2018, at Credit Suisse's Industrials Conference.

John Gray, senior vice president of policy and economics for the Association of American Railroads, said in a Jan. 3 release that coal "continued to suffer in 2018 from market forces that favor natural gas and renewables for electricity generation."

"What happens in 2019 will depend on how the domestic and global economies hold up and the policies — particularly monetary and trade that come out of our legislative and executive branches," Gray said.

Delays and other service problems plagued several rail companies in 2017 and through the first half of 2018. Arch Coal Inc. and Murray Energy Corp. were especially tough critics of CSX Corp. in 2017 as it integrated a new operating model, but Arch COO Paul Lang said on a third-quarter 2018 earnings call that the railroad "had a pretty good quarter overall" and that Union Pacific Corp. and Norfolk Southern had improved as well.

Norfolk Southern transferred employees south to improve the region's fluidity, said Allison Landry, a director and senior analyst with the research division of Credit Suisse AG, in an August 2018 interview. The company has since decided to move its headquarters from Norfolk, Va., to Atlanta, The Associated Press reported in December 2018.

Thomas Canter, outgoing executive director of the National Coal Transportation Association, said in September 2018 that the relationship between coal and railroad companies has improved, though railroads have turned their attention toward intermodal and general merchandise as coal continues to decline, leaving tracks and coal cars unused. For example, in May 2017, a CSX executive said the company had seen nearly $2 billion in coal revenue disappear during the last five years, so the company turned to other sectors to fill the gap, including shipping sand for hydraulic fracturing of natural gas wells.