Market Overview

Coal Exports Face Delays As U.S. East Coast Rail Service Slows For Florence

Coal Exports Face Delays As U.S. East Coast Rail Service Slows For Florence

Hurricane Florence will interrupt the main rail and maritime conduits for U.S. coal exports, according to Susquehanna Financial Group.

Susquehanna's rail analyst Bascome Majors says CSX Corporation (NASDAQ: CSX) and Norfolk Southern Corp. (NYSE: NSC) are most exposed to any service interruptions caused by Florence "with the most notable immediate risk being East Coast coal export infrastructure in Virginia (Hampton Roads) and Baltimore."

Although indeterminate as yet, the length of any Florence-related outages for Norfolk Southern and CSX could affect results, "given the profitable bottom-line contribution from that volatile commodity in 2018," Majors said.

Norfolk Southern operates the Lamberts Point transloading facility at the Port of Virginia, which can process up to 48 million tons annually and load the largest bulk ships with coal. CSX services the Dominion Coal Terminal in the Port.

The Port of Virginia saw coal volume of 11.6 million tons in the second quarter, a 36 percent gain from the same time last year.

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The Port of Virginia is closed to ship traffic due to Hurricane Florence. Norfolk Southern says it will issue embargoes to coal shippers affected by Florence. Any railcars enroute to the Port will be held at yards.

To the north, CSX operates the Curtis Bay Coal Piers in Baltimore. CSX and Norfolk Southern also service the Tradepoint Atlantic transshipment facility at the Port. The Port of Baltimore remains open to vessel traffic, but the U.S. Coast Guard is warning ships of gale force winds approaching the region.

While the actual impact and damage of Florence have yet to be felt, Majors says the storm could be a catalyst for transportation pricing due to the delays and restart of facilities following the storm.

"Once Florence passes, the disruption and subsequent rebuild/response could more materially tighten trucking capacity and spot pricing ahead of the peak season, supporting both volume and pricing on the rails given 2017's impact from Harvey around Houston fresh in shippers, carriers, and brokers' minds."

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Posted-In: Freight Hurricane FlorenceNews Commodities Markets


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