NS: Intermodal up, coal down in 2013 - Beckley, Bluefield & Lewisburg News, Weather, Sports

NS: Intermodal up, coal down in 2013

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Cargo shipments on the Heartland Corridor were up 9 percent in the fourth quarter and 16 percent year-over-year for 2014, Norfolk Southern executives said Jan. 22.

The corridor runs from the ocean port at Norfolk to Chicago. The railroad does not have terminals in southern West Virginia to take advantage of the growth on the corridor, but one should open at the Wayne County community of Prichard in the next year or so.

Also growing on the Norfolk Southern system are shipments of natural gas liquids and sand used in hydraulic fracturing, company executives said in a conference call with analysts following the announcement of fourth-quarter and year-end financial results.

For the quarter, Norfolk Southern reported record net income of $513 million. The company also reported record net income for the year at $9 billion, up 9 percent from 2012.

While coal shipments to northern utilities were up 1 percent in the fourth quarter, they were down by 18 percent to southern utilities, where stockpiles are high and competition from natural gas cuts into the market, according to Donald W. Seale, executive vice president and chief marketing officer.

Seale said he expects growth in demand for electricity in the South to be sluggish this year.

"Our best estimate is that normalization of stockpiles will take most of the first half (and) into the third quarter," he said. Northern utility stockpiles are at normal levels, Seale said.

When demand does return, the market will likely move away from coal mined in the Central Appalachian region, which includes southern West Virginia, and toward the Illinois Basin and Northern Appalachia, which includes Northern West Virginia, Seale said.

Central Appalachia coal will be at a cost disadvantage "just from a cost of production perspective," Seale said.

But Northern Appalachia and Illinois are farther from Southern utilities than Central Appalachia is, so that will mean longer hauls and higher revenue per unit for the railroad, depending on how much coal the utilities buy from those two regions, he said.

As for exports, "we don't expect our export market to be as strong in '14 as it was in '13," Seale said.

Norfolk Southern's coal revenues were $641 million, 2 percent lower compared with the fourth quarter of 2012, the result of an 8 percent decline in volumes, the company said in its earnings release. For the year, coal revenues totaled $2.5 billion, compared with $2.9 billion in 2012 and $3.5 billion in 2011.