The stock prices of several major railroads and railcar suppliers tumbled substantially more than the overall market did on Wednesday, after two big coal producers announced plans to cut back.
Eastern-U.S. majors Norfolk Southern Railway and CSX Transportation both saw shares slump more than 8 percent, compared with a 2.5 percent drop in the Dow Jones Industrial Average.
In the West, Union Pacific Railroad’s share price fell 6 percent. Prices for Canadian Pacific Railway stock dropped 6.7 percent while Canadian National shares slid 5.6 percent.
Citing problems from a 100-year rainfall at a coal mining region in British Columbia and “difficult geology” at a mine in Alabama, Walter Energy cut its production guidance for second-half 2011 to 5.2 million metric tons of metallurgical coal from an earlier 5.9 million.
Alpha Natural Resources said it faced “reduced metallurgical export shipments to Asia due to unexpectedly curtailed customer activity levels,” along with a force majeure notice from an export customer and some lower mine output than expected.
The company pared both its thermal or utility coal forecast as well as the outlook for high-heat coal used in metal production. For all of 2011, it now expects to ship 102.5 million tons to 109.5 million, down from a previous range of 104-112 million.
Bloomberg quoted one investor saying the output curbs were in line with a slowdown in the world economy. But railroad officials at Norfolk Southern and elsewhere continue to see a strong export coal market.
Walter Energy underscored that its output slowdown temporary and it looks for “clear improvement” early in 2012.
Utility coal demand has been soft this year, partly due to large stockpiles they had built up and from weak commercial demand in a struggling domestic economy. Shipments were also disrupted by long-running Midwest floods. However, rail industry officials say those stockpiles were sharply reduced by the summer-long heat wave, the flood effects are fading and domestic shipments should be on the rise soon.
Still, the selling hit rail suppliers as well as big railroads. Trinity Industries, the largest railcar builder, saw its share price fall 7.8 percent for the day, while Greenbrier shares sank 5.6 percent and American Railcar Industries stock sold off 6.3 percent.