June 15, 2018 Read More →

Rail executives plan for long-term decline in coal demand

S&P Global Market Intelligence ($):

Absent orders from the president and his administration or the U.S. Congress, it is unlikely new coal-fired power plants will be built in the United States, a railroad executive said June 13.

CSX Corp. is doing “everything we can” to work with coal miners and power plants, the company’s Executive Vice President and CFO Frank Lonegro said at a transportation conference in New York City, but the company still views the U.S. coal sector as being in long-term decline.

“Our job is to optimize the bottom line, and that business is really good for us,” Lonegro said. “So we want to stay in that business as long as we possibly can.”

The company currently holds a “stable” outlook for domestic utility coal demand. That outlook, Lonegro said, is based on no “real major plant closures in the next couple of years” affecting CSX.

At the same conference, Union Pacific Corp. Executive Vice President and CFO Robert Knight said that after watching coal rapidly fall from around 50% to around 30% of the share of U.S. power generation, the railroad is expecting that share to now hover around the high 20s to 30s in the long term.

“Yes, there’s probably going to be more downward pressure. There’s going to be some retirements of some utility units. How much coal that means does or does not move in our franchise remains to be seen,” Knight said. “So it feels—I’m not going to call out that it’s stable as a definitive term, but it feels more stable certainly than what we’ve experienced.”

More ($): Rail exec: Coal stable, but new plants unlikely without help of Trump, Congress

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