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 time-span 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.
