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Are Our Nation's Railroads in Trouble?

More than 20% of total rail carloads stem from the coal industry. Because of this reliance on coal shipments, CSX (NASDAQ: CSX  ) and Norfolk Southern (NYSE: NSC  ) each saw revenues from coal shipments drop by double digits in the first quarter of 2013 versus the same quarter last year. This also can't be great news for Warren Buffett's Berkshire Hathaway (NYSE: BRK-A  ) , as it owns BNSF railroads, which holds a 33% market share in coal shipments by rail, according to 2012 data.

These companies cater to the eastern United States, which has seen its coal industry hurt to a much greater degree than miners out west, such as Peabody Energy and its Powder River Basin thermal coal production. Coal from this region is produced further down the cost curve and is competitive with much lower natural gas prices than the Appalachian output.

Because exports are becoming a much bigger part of the domestic coal landscape, CSX has chosen to focus on providing greater access to a variety of export terminals. Peabody Energy is just one company that has deals in place to get its cheaper coal from the Powder River and Illinois basins to India, China, and the EU. For investors looking to capitalize on a rebound in the U.S. coal market, The Motley Fool has authored a special new premium report detailing exactly why Peabody Energy is perhaps most worthy of your consideration. Don't miss out on this invaluable resource -- simply click here now to claim your copy today.

For more on this topic and our analysts' opinions on the matter, tune in to the following video.

Read/Post Comments (2) | Recommend This Article (2)

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  • Report this Comment On June 23, 2013, at 11:02 AM, Martininsocal wrote:

    This is what happens when the Gov't is allowed to pick the winners and losers. It is especially distasteful when you realize it is all based on a 'religious' belief of the environmentalists who would love to see the collapse of the industrial economy.

  • Report this Comment On June 23, 2013, at 11:40 AM, 3dpenguin wrote:

    Allend406 we haven't had trains running on coal for years, all our trains are electric, the trains are used for transporting coal to areas which need it to generate electricity, this sort of power plant has been on the decline for years along with the demand for coal, thus the reason for the decline of the train shipping industry, which has the largest portion of its business come from transporting coal.

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