Bluefield Daily Telegraph, Bluefield, WV

November 25, 2012

Coal business challenged

BILL ARCHER
Bluefield Daily Telegraph

BLUEFIELD — According to W.R. “Pete” Cooke, during the Great Depression, C.H. Archer, a former superintendent of Bluefield public schools, would take students out of class on an impromptu field trip to the Bluefield railroad yard any time the tracks were filled with coal cars. Cooke said that Archer felt strongly that the loaded coal cars were a symbol of prosperity.

In recent weeks, the Norfolk Southern Railway’s Bluefield yard has seen a lot more empty coal hopper cars than full, as shipments of metallurgical coal from southern West Virginia and southwestern Virginia have slowed by 22 percent in the third quarter, according to information released by Don Seale, NS Corp. executive vice president, chief marketing officer. Seale’s statements as well as statements by other NS executives were part of the Oct. 23, NS Corp. Earnings Conference Call.

“As we’ve seen in the last few quarters, competition from natural gas and weaker demand for electricity continued to impact our utility volumes,” Seale stated according to edited transcripts of the conference call. “Export volumes fell 28 percent sequentially from the second quarter to the third quarter as the global met coal market weakened materially. Also, our participation in the export thermal coal market weakened during the third quarter as well with export thermal shipments representing only 17 percent of our total export volume in the quarter versus 29 percent of our export volume in the second quarter.”

Norfolk Southern had some highlights to report on Oct. 23. The railway’s intermodal business continues to grow and NS is taking steps to see additional growth in that area of its business, and the report indicated that automotive sector traffic was up. Still, the outlook that Seal presented was not bright.

“Continued competition from natural gas and reduced demand for electricity will continue to impact our utility coal volumes,” Seale stated in the conference call. “And dramatic changes in the export coal market due to weaker demand for both met and steam coal on Europe and Asia will continue to present a challenging environment for export volume of export pricing.”

Rick Taylor, president of the Pocahontas Coal Association, a grassroots organization made up of small coal mine operators, service providers and supply vendors in the southern West Virginia and southwestern Virginia coalfields, said that the present slump is rough, but not as bad as it has been in the past three decades.

“For those of us in the met coal business, we are used to dramatic ups and downs in business cycles,” Taylor said. “In my opinion, the downturn we had in the early 1980s and again in the late 1990s was worse than this. I think the thing that makes this downturn of the cycle seem worse is that we have just gone through a period when things have been pretty good, and we had been opening new mines.

“It isn’t good right now, but what hurts us more is that we feel like we’re fighting against the government,” Taylor said. “When business is down, you would like to be able to have the government working with you to get through hard times. That just hasn’t been the case.

“I know it’s cliché, but I don’t see a light at the end of the tunnel,” Taylor said. “In metallurgical coal, we’re tied to the U.S. Economy and the global economy. Right now, I don’t see anything pointing to the resurgence of a robust economy. Since we don’t have the government on our side, we’re having to fight the government and the economy.”

In the Oct. 23, conference call, Wick Moorman, NS chairman, president and chief executive officer expressed optimism in the railroad’s outlook because of its successful intermodal component, but also said NS is positioned well when the cal business rebounds.

“Despite the current softness in our coal business, we have tremendous long-term strength in terms of our access to major coal deposits, our strong metallurgical coal franchise and our export facility access, including our Lambert’s Point terminal, the largest coal peer in North America,” Moorman stated, according to the edited transcripts of the NS Corp. Earnings Conference Call on Oct. 23.

— Contact Bill Archer at barcher@bdtonline.com