Stimulus and War Against Fossil Fuels are Boosting Coal

The Government juiced post-pandemic U.S. economy is driving a surprsing boom in coal under the direction of the most anti-coal World Government bodies in history. While coal production has fallen more than 50% this past decade, a sudden shortage of energy supplies is now a sign of resilience for the dirtiest fossil fuel on the planet. Domestic coal production in 2021 will rise 15% to meet stronger demand for electricity at home and abroad, according to the U.S. Energy Department. The coal boom is unlikely to lose momentum anytime soon as robust economic growth has triggered rising demand far faster than supply can handle.  Global coal consumption is still increasing because of demand in Asia while suppliers are reluctant or unable to open new mines, so prices are likely to remain high. The current US adminstration and unified efforts globally to rid the world of clean nuclear and all fossil fuels is exacerbating the current shortage and adding profits to the bottom line of dirty fuel producers from coal and oil to natural gas. Even rail transport companies are seeing a sharp rebound from the normally depressed coal sector. Perpetually cheap and clean natural gas has kept the use of coal share of  electricity production  in a tailspin from 50% to 23% over the past 16 years, but surging global demand and efforts to restrict future fossil fuel production have sent Nat Gas prices to 31 month highs. Higher petroleum cost has allowed coal to become more competitive. Coal exports are up 21% this year.

The global energy supply shortfall has sent coal prices to the highest level in history, outside of the export peak years of 2007 – 2008.   


More coal is good for rail companies such as CSX and Norfolk Southern (NSC) during an already historic strain to the shipping supply chains. In 2019, 69% of U.S. coal shipments were delivered by rail, 12% by water, 9% by truck and 9%, mainly at mine-mouth plants (electric power generated next to a coal mine). Coal tonnage by rail had fallen 46% by 2020 from the 2008 peak, yet coal still accounts for 14% of rail revenue and 25% of cargo. The rare rise in coal shipments along with even stronger growth from all categories of rail volumes has boosted revenues and margins of Railroad companies. Union Pacific just reported a 22% increase in productivity,9% longer train length and 50% higher operating profits year over year. 

With the rise of the Covid Delta variant, still in the early stages of spreading around the US and Europe, combined with industrialized country resistance to core energy production sources, coal and all fossil fuel prices will remain high into 2022. Shipping companies of all types will continue to grow above trend to overcome record congestion in their supply chains. Some virus related slowdown fears will  trigger periodic corrections in these rail and trucking stocks, but that would only extend the eventual growth peak until we can move to a post pandemic world of self sufficiency that requires no more fiscal and monetary stimulus.


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