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  August 2nd, 2017 | Written by

North American Rail: A Renaissance for Coal?

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  • Two major North American railroads reported an upsurge in coal tonnage this year.
  • Norfolk Southern and CSX both showed a 27-percent increase in coal tonnage in the second quarter.
  • Rail growth not being driven by higher consumer demand.

It sounds like a story straight out of the President Donald Trump‘s dream book. Two major North American railroads reported an upsurge in coal tonnage this year.

The results for the second quarter of the year reported by Norfolk Southern Rail Corporation showed coal as a major contributor to growth, with a 27-percent increase in tonnage and a one-percent rise in the number of cars moved.

CSX reported similar results, with overall tonnage growing by two percent but coal volumes also spiked by 27 percent.

Besides an apparent increase in the demand for coal, which is almost invariably carried by train, the results “reflect the strength of demand and the tight market conditions in North America for owners of physical transport assets,” according to a report from Transport Intelligence.

The growth was not being driven by higher consumer demand, the report noted, but capacity shortages and higher prices in trucking and “a recovery in bulk sectors such as coal and other commodities… This might suggest that there is a wider dynamic of ‘bounce-back’ in the marketplace that is amplifying the effects of the recovery specifically for rail freight, and this may moderate in the near future. That said, the rail freight sector does appear to have sustained a profitable balance between demand and supply.”

Norfolk Southern saw profits rise by 23 percent and revenue seven percent in the second quarter. Tonnage increased by six percent. Besides the 27-percent rise in coal tonnage, intermodal traffic saw a year-on-year increase of six percent in volume and 10 percent in revenue, reflecting, according to Ti, the tightening trucking market.

CSX saw second-quarter revenue and operating profit grow higher by eight percent and 14 percent respectively.

Canadian Pacific also saw higher revenues and profits, benefiting from increased agri-bulk traffic such as grains and potash. Revenue was 13 percent higher in the second quarter and net income was 46 percent higher.