CSX forecasts softer 4Q rail demand

Spanish Market: Agriculture, Biofuels, Chemicals, Coal, Coking coal, Crude oil, Electricity, Fertilizers, Freight, LPG, Metals, Oil products, Petrochemicals, Petroleum coke
17/10/24

Eastern US railroad said it expects that fourth quarter commodity market conditions will be mixed, limiting some freight demand.

"Going into the fourth quarter, near-term conditions look modestly more challenging," chief executive Joe Hinrichs said on Wednesday.

But the railroad expects "modest volume growth", supported by a few segments including chemicals and agriculture. But lower locomotive fuel prices and the impact of international coking coal prices, which are linked to export rail contracts, could drive a decrease in total revenue during the fourth quarter. He estimated that impact at roughly $200mn compared with last year's fourth quarter revenue of $3.68bn.

CSX expects to see a carryover of year-over-year momentum in chemicals, agriculture and food, forest products and minerals, while metals and automotive will continue to be challenged.

Demand for metals shipments is predicted to soften through the end of the year. Interest in shipments, particularly steel, is soft because of "sluggish demand, ample supply and low commodity prices", chief commercial officer Kevin Boone said.

A weaker-than-anticipated automotive market contributed to the drop in metals demand.

Consumer demand for automotive products has been reduced by high retail prices and interest rates, which has led to increased dealer inventories and slower production, Boone said.

But CSX expects that an "interest rate easing cycle will help these markets normalize," Boone said.

Metals and equipment volume fell in the second quarter, primarily because of lower steel and scrap shipments. Shipments of metals and equipment fell by 9pc to about 64,000 carloads compared with the same three months in 2023. Revenue dropped to $208mn, down by 8pc from a year earlier.

Automotive volume dropped in the second quarter because of lower North American vehicle production, CSX said. Automotive traffic fell to 301,000 railcars loaded, down by 2pc from the third quarter 2023. Automotive revenue dropped to $98mn, down by 3pc compared with a year earlier.

The outlook for fertilizer shipments is mixed following the third quarter as a decline in long-haul phosphates shipments persisted. Volume was negative, but the railroad was able to haul some profitable spot shipments.

Shipments of fertilizer fell to 45,000 carloads in the third quarter, down by 4pc from a year earlier. Fertilizer revenue dropped to $118mn, down by 5pc from a year earlier.

CSX expects growth in some market segments.

Chemicals freight demand is expected to continue growing following "consistent, broad strength across plastics, industrial chemicals, LPGs, and waste.

That demand helped boost chemicals volume by 9pc compared with a year earlier. Chemicals revenue rose to $727mn in the second quarter, up by 13pc compared with a year earlier.

Agricultural and food products shipping demand is expected to continue growing, led by demand for grain and feed ingredients from the Midwest for supplies. That follows a third quarter when higher ethanol shipments, as well as increased overall volume helped raise volume by 9pc from the third quarter of 2023. Revenue from shipping agricultural and food products rose to $416mn, up by 11pc from a year earlier.

CSX expects intermodal growth to continue with the trucking market falling, which would help drive more container freight to rail. Intermodal shipments are goods shipped in containers and trailers between different modes of transportation.

The 1-3 October strike by the International Longshoremen's Association (ILA) did impact intermodal traffic, but the railroad was pleased with the "relatively quick short-term solution", Boone said.

International intermodal volume during the third quarter rose because of higher east-coast port traffic. Domestic volume was mostly flat.

Overall intermodal volume during the quarter increased by 3pc compared with a year earlier. But lower revenue per container helped reduce total intermodal revenue by 2pc to $509mn.

CSX does not expect a major shift in coal volume through the end of the year as coal markets seem relatively stable and utility stockpiles are sufficient, Boone said. Rising natural gas prices are also unlikely to stimulate a "near-term step-up in volumes".

Export coal demand has been consistent lately, particularly from buyers in Asia.

But revenue per railcar for export coal could make a modest single digit drop, as contracts are tied to international coal benchmarks and prices fell earlier this year.

Expport coal voume rose to 11.1mn short tons (10.1mn metric tonnes) in the second quarter on higher demand for thermal and coking coal. But domestic coal deliveries fell to 10.2mn st, down by 12pc from a year earlier, on lower deliveries to power plants and lake and river terminals.

Rail coal volume fell by 2pc from a year earlier, while revenue dropped by 7pc to 553mn st.

Total CSX profits rose to $894mn, up by 8pc compared with third quarter 2023. Revenue increased to $3.6bn, up by 1pc.

By Abby Caplan

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

06/12/24

Republicans weigh two-step plan on energy, taxes

Washington, 6 December (Argus) — Republicans in the US Congress are considering trying to pass president-elect Donald Trump's legislative agenda by voting first on a filibuster-proof budget package that revises energy policy, then taking up a separate tax cut bill later in 2025. The two-part strategy, floated by incoming US Senate majority leader John Thune (R-South Dakota), could deliver Trump an early win by putting immigration, border security and energy policy changes into a single budget bill that could pass early next year without Democratic support. Republicans would then have more time to debate a separate — and likely more complex — budget package that would focus on extending a tax package expected to cost more than $4 trillion over 10 years. The legislative strategy is a "possibility" floated among Senate Republicans for achieving Trump's legislative goals on "energy dominance," the border, national security and extending tax cuts, Thune said in an interview with Fox News this week. Thune said he was still having conversations with House Republicans and Trump's team on what strategy to pursue. Republicans plan to use a process called budget reconciliation to advance most of Trump's legislative goals, which would avoid a Democratic filibuster but restrict the scope of policy changes to those that directly affect the budget. But some Republicans worry the potential two-part strategy could fracture the caucus and cause some key policies getting dropped, spurring a debate among Republicans over how to move forward. "We have a menu of options in front of us," US House speaker Mike Johnson (R-Louisiana) said this week in an interview with Fox News. "Leader Thune and I were talking as recently as within the last hour about the priority of how we do it and in what sequence." Republicans have yet to decide what changes they will make to the Inflation Reduction Act, which includes hundreds of billions of dollars of tax credits for wind, solar, electric vehicles, battery manufacturing, carbon capture and clean hydrogen. A group of 18 House Republicans in August said they opposed a "full repeal" of the 2022 law. Republicans next year will start with only a 220-215 majority in the House, which will then drop to 217-215 once two Republicans join the Trump administration and representative Matt Gaetz (R-Florida) resigns. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Denmark's wind tender flop linked to H2 network doubts

06/12/24

Denmark's wind tender flop linked to H2 network doubts

London, 6 December (Argus) — Denmark's failure to attract bids in an offshore wind tender was partly caused by the country's lack of firm commitment to a hydrogen pipeline network, according to Danish and European hydrogen associations. For Denmark's hydrogen industry the failed tender is raising concerns that Copenhagen might resort to state aid for offshore wind, which could jeopardise renewable hydrogen production that is compliant with EU rules. Denmark unsuccessfully offered three areas totalling 3GW in a first part of the auction that ended on 5 December, and will offer another 3GW in a second part ending in April 2025. The "very disappointing" result will now be investigated by the Danish Energy Agency to discover why market participants failed to bid, energy minister Lars Aagaard said. Wind project developers may have worried that low electricity prices in an increasingly saturated power market and inadequate export routes — either via power cables or as hydrogen via pipeline — would deny a return on investments, industry participants said. Ample offshore wind potential could allow Denmark to generate power far in excess of its own needs. But in order to capitalise on this the country would need to find a way of getting the energy to demand markets. Turning offshore wind into renewable hydrogen for export was "a very attractive solution" for developers, Hydrogen Europe chief policy officer Daniel Fraile said, but would rely on timely construction of a network "all the way from the coast to Germany's hydrogen-hungry industry." Denmark's hydrogen network was recently pushed back to 2031-32 from an initial 2028, partly because of an impasse over funding that provoked anger from industry. The government has said it will only help fund the hydrogen transport network if there are sufficient capacity bookings guaranteeing its use. But this approach increases risks for developers, according to Fraile. "You need to handle the risk of winning the offshore tender, finding a hydrogen offtaker in Germany and commit to inject a large amount of hydrogen over several years. Then deliver the project on time and on cost," he said. "This is a hell of an undertaking." Industry association Hydrogen Denmark's chief executive Tejs Laustsen Jensen agreed, calling the failed tender "a gigantic setback". "The uncertainty about the hydrogen infrastructure has simply made the investment too uncertain for offshore wind developers," he said. "Now the task for politicians is to untie this Gordian knot." "Of course, the tender must now be re-run, but if the state does not guarantee in that process the establishment of hydrogen infrastructure, we risk ending up in the same place again," he said. The booking requirement as a prerequisite for funding the network "must be completely removed," Jensen said. Green energy association Green Power Denmark said "there is still considerable uncertainty about the feasibility of selling electricity in the form of hydrogen," but pointed to other factors that may have led to the tender failing to attract bids. Wind turbines and raw materials have become more expensive because of inflation while interest rates have risen sharply, reducing the viability of such projects, the group's chief executive Kristian Jensen said. Unlike some other countries, Denmark does not intend to fund grid connections or provide other subsidies, he said. Unwanted help Hydrogen Denmark's Jensen warned against the government resorting to subsidies to help get offshore wind farms built. "State support for offshore wind would be the death knell" for the hydrogen sector and would "de facto kill all possibilities for a green hydrogen adventure in Denmark," he said. Granting state support for offshore wind farms would mean these assets would not comply with the additionality requirement of the EU's definition for renewable fuels of non-biological origin (RFNBO), which are effectively renewable hydrogen and derivatives. EU rules state renewable assets are only considered 'additional' if they have "not received support in the form of operating aid or investment aid," although financial support for grid connections is exempt from this. "If state aid is provided for the offshore wind that is to be used to produce the hydrogen, we will lose the RFNBO stamp, and the Danish hydrogen cannot be used to meet the green EU ambitions for, among other things, industry and transport, and the business case is thus destroyed," Jensen said. By Aidan Lea and Stefan Krumpelmann Geographical divisions of Denmark's H2 network plan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US House panel approves river infrastructure bill

06/12/24

US House panel approves river infrastructure bill

Houston, 6 December (Argus) — A US House of Representatives committee has approved a bipartisan bill that authorizes improvements to navigation channels by the Army Corps of Engineers (Corps) and maintenance and dredging of river and port infrastructure projects. The House Transportation and Infrastructure Committee advanced the Water Resources Development Act (WRDA) after several months of political wrangling to integrate earlier versions of the legislation approved by the House and Senate . The bill will head to the full House next week, said committee chairman Sam Graves (R-Missouri). This would be the sixth consecutive bipartisan WRDA bill since 2014 if passed by congress. WRDA is a biennial bill that authorizes the Corps to continue working on projects to improve waterways, including port updates, flood protection and supply chain management. WRDA will also "reduce cumbersome red tape", which will allow for quicker project turnarounds, Graves said. The bill authorizes processes to streamline work, he said. The bill also adjusts the primary cost-sharing mechanism for funding for lock and dam construction and major rehabilitation projects. The US Treasury Department's general fund will pay 75pc of costs, up from 65pc, with the rest coming from the Inland Waterways Trust Fund, which is funded by a barge diesel fuel tax. By Meghan Yoyotte Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Tight supply fuels Indian interest in wire rod imports

06/12/24

Tight supply fuels Indian interest in wire rod imports

Mumbai, 6 December (Argus) — Interest in steel wire rod imports is increasing in India owing to limited domestic availability, delivery snags and high prices set by primary producers, according to industry sources. Unspecified quantities of Chinese low-carbon wire rod were booked for $515-520/t cfr Mumbai, excluding value-added tax, in the past few weeks, sources in both China and India told Argus . High-carbon wire rod was also heard to have been purchased from China recently, although this could not be confirmed. The booking follows reduced supply from state-controlled long products manufacturer Rashtriya Ispat Nigam (RINL), according to a Mumbai-based long products trading firm. RINL at present is grappling with financial difficulties and raw material shortages, which has taken a toll on its production. Many participants have questioned this purchase, as no Chinese mill has a Bureau of Indian Standards (BIS) certificate required for exporting wire rod to India. Non-BIS material can be cleared by customs only if the material is used to manufacture goods that will be exported. The booking has been made under the advance licence scheme, which allows for such non-BIS imports, a source said. But there are only a handful of wire manufacturers that export their product and can use imported wire rods, according to market participants. At a trade fair in Mumbai last month, wire manufacturers said they were increasingly seeking alternatives to domestic primary wire rod as high input costs were squeezing their margins. High-carbon wire rod was priced at 57,000-58,000 rupees/t ($672-684/t) by major domestic producers on a delivered basis in western India, sources said. Chinese offers stood at $570-580/t cfr India for high-carbon wire rod a few weeks ago, but have now fallen to $560/t cfr, a trading source said. Wire manufacturers focused on domestic sales were turning to secondary wire rod, which was nearly 20pc cheaper than primary material, according to a participant at the Mumbai trade fair. But trading companies and consumers pointed to availability as the bigger issue, with only a few major primary producers dominating the wire rod market. Securing a regular and timely supply of wire rod from primary mills has become a major challenge, causing supply chain disruptions for end-users, they said. "The price is one factor, but availability is also a key issue. Mills are unreliable when it comes to allocation and delivery of the material," a wire manufacturer said. "This has always been the case but not to the extent seen recently. Now supply concerns have become worse because of RINL's issues." RINL's finished steel output fell by 26pc on the year to 1.6mn t from April-October, according to provisional data from the steel ministry's joint plant committee. Another wire manufacturer said it had not imported wire rod for more than a year, but was now open to cheaper imports to protect its margins. For some finished products, such as automobile parts, it is essential to use wire rod from primary producers but imported or secondary material could be used to manufacture some other products, a manufacturing firm executive said. Long products amount to only a small portion of India's overall steel imports, which are dominated by hot-rolled coil and other flat products. From April-October this year, India imported about 49,300t of wire rod — including alloy, non-alloy and stainless steel products — an increase of more than 30pc on the year, according to data from the steel ministry's Joint Plant Committee. This made up less than 1pc of India's overall finished steel imports during the seven months. By Amruta Khandekar Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Newly agreed EU, Mercosur FTA faces uphill battle

06/12/24

Newly agreed EU, Mercosur FTA faces uphill battle

Montevideo, 6 December (Argus) — The EU and South America's Mercosur closed a free-trade agreement (FTA) nearly 25 years in the making, but there is still a long road to ratification. Uruguayan president Luis Lacalle and European Commission president Ursula von der Leyen announced the deal at a Mercosur summit in Montevideo, the Uruguayan capital. The presidents of the three other Mercosur founding members — Argentina, Brazil and Paraguay — were present. The FTA will remove tariffs on more than 90pc of goods among the members. Von der Leyen called the agreement a historic milestone that would benefit 700mn consumers. She said the agreement "is not only a trade agreement, but also a political necessity." Lacalle said "an agreement of this kind is not a magical solution, but an opportunity." Leaders recognized that the agreement still has major hurdles to clear as it requires approval from member states. The agreement will go to legal review and translation in the next month in view of its future signing, according to the Mercosur-EU declaration. While the Mercosur countries are in favor of the agreement, opposition is strong in France, Poland and several smaller EU states. Argentinian president Javier Milei, who supports the agreement, criticized Mercosur as a block. "Mercosur, which was born with the idea of deepening our commercial ties, ended up like a prison that does not allow its members to take advantage of their comparative advantages or export potential," he said. Van der Leyen said that more than 60,000 businesses, half of them small, export to Mercosur. The EU exported $59bn to Mercosur in 2023, while Mercosur's four founding members shipped $57bn to the EU. She also stressed the importance of EU investment in Mercosur, including in sustainable mining, renewable energy and sustainable forestry. Brazilian president Luiz Lula da Silva said during the summit that the region had to take advantage of its resources, including agriculture and energy. The four Mercosur countries are major food producers, including crops such as corn, soy and sugarcane, used for biofuels. Brazil is the world's top soy producer, while Argentina is third, Paraguay sixth and Uruguay in the 14th spot. Bolivia, which joined Mercosur in July, is the 10th producer. Brazil is a major mineral producer and Argentina is slowly beginning to strengthen its mining sector. It has the world's second-largest lithium resources. Argentina is also beginning to monetize its unconventional gas formation, Vaca Muerta, the second largest in the world with 308 trillion cf of reserves. It is working on different LNG projects, with a focus on exports to Europe. The Mercosur countries also have in common plans for low-carbon hydrogen production, which also see the EU as an export market for value-added products, such as fertilizers. By Lucien Chauvin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more