US coal market braces for seasonal infrastructure woes

Rail and port constraints continue to frustrate US coking coal exporters, with market participants bracing for a surge in freight demand this autumn and a potential repeat of last year's extreme icy weather in winter.

A number of producers have noted a recent easing of vessel queues at Hampton Roads, although queues at the port's Lamberts Point terminal are still understood to be in double figures. But even as those delays ease slightly, fresh infrastructure woes are potentially round the corner as the summer season ends.

Eastern US railroad CSX last week reassured customers that it has a "comprehensive plan" to handle the traditional autumn surge in freight volume, as buyers and sellers push through a high volume of goods before the winter holidays. Some customers have been particularly concerned after last year's peak season, when service worsened as CSX was implementing its precision scheduled railroading model.

The peak season does not directly involve coal, but it leads to increased competition for rail capacity, crew and locomotive supply — all of which can result in a general slowdown in coal transportation. CSX said last week it has developed a plan to accommodate expected volume growth on some critical routes, and has also added trains, locomotives and crews along its network. Certain terminals have received extra lift equipment, chassis and personnel.

Fellow eatern carrier Railroad Norfolk Southern has also been taking steps to improve its service but said more progress is still needed, while coal market participants continue to describe delays. An exporter said the railroad had asked customers to limit early-July loadings to help it catch up on deliveries.

CSX coal loadings totalled 16,820 cars in the week ending on 8 September, down by 1pc from a year earlier. But year-to-date coal loadings were up by 4.5pc from the same period of 2017, at 568,600 cars.

Norfolk Southern's coal loadings totalled 20,580 cars in the week to 1 September, up on the year by 1pc. But year-to-date coal loadings edged down by 1.1pc to 657,600 cars.

Market participants are also wary of a possible repeat of last year's severe winter weather, which led the Hampton Roads terminal, managed by Dominion Terminal Associates, to declare force majeure in early January. The Norfolk Southern-controlled Lamberts Point terminal was also hit particularly hard because its lack of ground storage facilities makes it highly vulnerable to any additional supply chain disruptions. The harsh 2017-18 winter put Lamberts Point and Norfolk Southern on the back foot at the start of this year from which they have struggled to fully recover, according to some market participants.