A growth commodity - On track - coal freight in the railroad industry - Brief Article

Railway Track and Structures, August, 2001

Old King Coal, who ruled railroad traffic in bygone days, is making a comeback. After an off year, black diamonds are buoying up the industry as it tries to ride out the storm of the current economic downturn. Income from coal hauling is improving quarterly financials, but it's far from enough to sustain the healthy m/w department capital budgets of the past two or three years.

Still, it's nice to have coal traffic pick things up as it has, and to look forward to some more healthy numbers for coal carloadings. As oil and natural gas prices soar, the outlook for coal is looking better and better, and not just for the low-sulfur coal that rolls out of Wyoming's Powder River Basin. Coal business in Appalachia has been down, but prospects there are brightening. The State of Illinois plans to spend several million dollars to revitalize its moribund coal industry.

The biggest railroad project on the horizon right now, the Dakota, Minnesota & Eastern's entry into the Powder River Basin and rebuilding of its current railroad, hinges on the prospects for coal. Many a supplier is turning eyes to South Dakota in hopes of seeing this project get the green light. Of course, the two Class ls that already serve the PRB are not looking at the project with the same kind of enthusiasm as the suppliers.

On the positive side, DM&E has already gotten most of the communities affected to endorse the project or, at least, remain neutral, with some vocal folks in Rochester, Minn., as the very noticeable exceptions. Increasing demand for coal is a definite plus for the project. The extremely-heavy traffic already in the Basin points to the need for more capacity. As Lou Cerny pointed out in the June 2001 RT&S, one 13-mile stretch of track there already carries more than 300 mgt per year and frequently handles one mgt in a single day. I've been told this stretch of track carries more tonnage that any other stretch in the entire world.

One argument I heard against the project was that suppliers would be unable to handle the demand for rail, crossties, ballast, etc. That was debatable when I first heard the argument, but it's certainly not true today. Suppliers would be ready, willing and able to deliver needed materials, and delighted to obtain the business. With no strong upturn likely to affect the railroads for another 18 months or so, at least, the project could get started and be well under way before any railroads began to feel a pinch on supplies. That is, if they ever did feel the shortage.

By the time the DM&E project's appetite for materials begins to ease up, we can hope railroads will be on the upswing once again, with lots of money available to pay for engineering projects that are currently being put off because of tight budgets.

Increases in output from other coal-producing areas could also have a very positive effect on m/w budgets. Coal is a heavy-haul item, which means the tracks have to stand up to frequent, heavy loads. Good track doesn't happen by accident, as any person who has ever worked on the engineering side can readily tell you. Also, it will take a lot of money and work to add capacity in order to handle the new coal trains.

Is coal going to be the magic material that will not only boost the railroad industry and save suppliers in a slow time, but also lead railroads into a new era of prosperity? That would be nice, wouldn't it? Unfortunately, experts looking into their crystal balls just don't see that happening.

But coal is being very, very good to railroads right now. I just thought it was time we railroad folks paused to remember what coal really means to us and to pay some respect to a much-maligned industry.

Tom Judge, Editor