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What must happen for coal to rebound



The top official at Norfolk Southern Railroad says at least three things must happen before the demand for U.S. coal will increase.

According to Norfolk Southern CEO Wick Moorman those things are:

• Natural gas prices must increase,

• the economy must improve,

• and normal cold winters and hot summer temperatures must return.

Moorman made his observations last week while announcing that the railroad based in Norfolk, Va., suffered a fourthquarter profit decline of 14 percent to $413 million, or $1.30 per share, because of weak coal demand. That’s down from $480 million, or $1.42 per share, a year earlier.

Norfolk Southern said it’s extremely diffi cult to predict when coal shipments will increase.

The company said 590 railroad employees are currently on furlough, and that it plans to reduce costs this year by eliminating about 300 maintenance jobs because crews have become more efficient. The railroad said it plans to reduce its expenses by $100 million this year.

The weak demand from utilities is a big part of why Norfolk Southern and other railroads are hauling less coal.

Norfolk Southern operates about 20,000 miles of rail in 22 states, and the railroad serves all major container ports on the East Coast.

The other major freight railroad in the eastern United States, CSX Corp., also reported earnings last week, but it was better able to offset the coal volume declines. CSX said its fourth-quarter profit declined 3 percent to $443 million, or 43 cents per share. That’s down from $457 million, or 43 cents per share, in the previous year’s fourth quarter.

Jacksonville, Fla.-based CSX also cited continued weak coal demand for what it expects to be a challenging 2013.

CSX Chairman, CEO and President Michael Ward said some coal users will continue to shift to natural gas in 2013, and the weak global economy will undercut demand for industrial coal use.

“2013 will be another challenging year as the evolution of the energy market continues but stabilizes,” Ward said.

CSX officials predict domestic coal shipments will decline by 5 to 10 percent in 2013 from last year’s weak levels. And coal exports will likely drop to 40 million tons from last year’s 48 million tons.

CSX operates more 21,000 miles of track in 23 eastern states, including the eastern Kentucky coalfields, and two Canadian provinces.

Compiled from Associated Press reports.



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