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11/20/2012


Rail News: Rail Industry Trends
EIA: Average cost to ship coal by rail in U.S. rose about 50 percent from 2001 to 2010



The average cost to ship coal by rail to U.S. power plants increased almost 50 percent from 2001 to 2010, according to an article posted online yesterday by the U.S. Energy Information Administration (EIA).

Rail transportation accounts for more than 70 percent of U.S. coal destined to power plants, so changes in rail rates can have a key impact on the cost of coal deliveries, the report states. Transportation costs accounted for 40 percent of the average overall cost of coal delivered to power plants in 2010.

"On average, nominal U.S. rail rates for shipping coal grew from $11.83 to $17.25 per short ton from 2001 to 2010. Rates grew slowly in the beginning of the decade before increasing almost 11 percent in 2005, then continuing to grow at a relatively robust pace until the recession," EIA officials said in the report. "However, the impact of the recession on transportation rates was short-lived as rates grew more than 9 percent in 2010."

National numbers can be somewhat misleading because regional dynamics tend to vary considerably among the six major coal basins, they said. For example, Southern Appalachian coal costs increased more than 10 percent annually from 2001 to 2010, while Powder River Basin rates grew 1.5 percent over the same period.

"The wide range in minemouth coal prices and transportation distances across the United States create significant variation in the impact of transportation rates on overall coal costs, with different basins affected to significantly differing degrees," EIA officials said.

Meanwhile, state-level rate change data over the 10-year period shows Virginia-to-Tennessee rates grew 83 percent on the high end while Wyoming-to-Kansas rates fell 23 percent on the low end — a 106-point swing, the report states.

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