When Clarence Gooden, chief marketing officer for eastern U.S. rail giant CSX Transportation, speaks of the railroad’s coal business, he tells an export story that is generating big bucks for North American suppliers and freight transportation companies.
CSX’s strong first quarter earnings, Gooden told analysts in April, were driven in part by strong coal shipments — not for the weak power plant-driven domestic market, but from overseas buyers.
Many of those foreign customers want the high-heat “met” coal, used for metallurgical processing such as steelmaking or shaping other metals out of raw ore or scrap materials. This coal is often found in deep mines of Appalachia, and reaches East Coast export terminals on CSX or Norfolk Southern Railway trains.
In the first three months of 2011, CSX coal volume grew just 3 percent, largely because three-fourths of the shipments go to U.S. customers who took less of it. But export demand was strong for U.S. coal shipments to Europe, Asia and South America, Gooden said.
The coal traffic is part of a broader trend in U.S. and Canadian exports of industrial raw materials — ores, scrap, copper, aluminum, chemicals, industrial fuel and equipment — used to churn out finished goods overseas that may return to U.S. shores in containers of consumer goods.
The Commerce Department said U.S. exporters shipped nearly $3 billion in met coal in the first quarter, up more than $1.2 billion from the same period in 2010.
That was just part of an export flow that included a $1 billion gain in plastics materials, $590 million more in copper, a $631 million increase in aluminum and alumina, $648 million more in metal shapes to be cut into final products and a gain of $492 million in metalworking machine tools.
U.S. suppliers also were shipping final products such as cars or other vehicles and some big parts such as car engines and rail equipment for assembly in other countries. And, although automotive, parts and engine shipments topped $32 billion through March — up $5.4 billion — exports of many industrial material categories exceeded $120 billion for a $30 billion increase.
That hot foreign demand could cool in the current quarter, however. Europe is wending through another round of currency risks and bailouts of weaker nations in the eurozone, while China recently raised interest rates in its continuing fight to curb inflation. Both factors could slow demand for U.S. materials.
So, too, could the historic flooding along the Mississippi that comes amid a flattening of rail shipments overall since March. The U.S. Department of Agriculture said volumes coming off grain barges at Gulf of Mexico terminals are well below normal levels for this time of year, but the same conditions can curb the even busier coal and chemical traffic in that region.
Still, strong foreign demand, if sustained, can lead to nice profits for those who move it. Despite just a small bump in overall coal traffic compared to the 2010 first quarter, Gooden said CSX increased coal revenue 19 percent.
The railroad shipped about 11 million tons of coal abroad in the quarter, and looks to haul about 40 million tons for the year because of “improving global demand and evolving supply constraints outside of the United States,” Gooden said.
That means continued overseas demand as well for ore and scrap to make new metals, for metal products to reshape into factory goods, and a host of other industrial inputs that will drive imports of finished products back to the U.S.
Contact John D. Boyd at email@example.com.