Class I railroads attribute workforce reductions to decrease in coal shipments

[NS Newsfeed]

WASHINGTON – As U.S. Class I railroads close out the first half of 2015, some railroads attribute obstacles faced during the first two quarters to an inevitable decline in coal shipments. According to the weekly rail traffic report compiled by the Association of American Railroads for the week ending July 11, coal carloads in the U.S. were down 10.5 percent alone in comparison to the same date in 2014.

A recent article by Bloomberg News notes that shipments of grain and energy products, which include coal, crude oil, and ethanol, are weakening, with carloads in North America falling 2.3 percent in the three months ended June 30. Declines in volumes have prompted railroads to adjust manpower to meet industry demands.

Canadian National has furloughed 400 U.S. workers, Kansas City Southern has cut 110 jobs, and BNSF Railway has also furloughed an undisclosed number of workers, according to the same article.

CSX spokesperson Kaitlyn Barrett tells Trains News Wire that CSX has 400 employees on furlough, and that number may rise to 600 in the third quarter depending on network demand.

"CSX aims to match workforce needs with general business demand. CSX is furloughing contract employees in certain areas, as a result of continued weakness in coal markets and an ongoing focus on sizing workforce to match demand in each region," Barrett says.

Most of the furloughed employees operate trains, either as locomotive engineers or conductors on the railroad's Huntington Division. Furloughed employees may be eligible to work in other areas where traffic volumes are higher.

The Huntington Division includes much of the railroad's Appalachian coalfields where several coalmine companies have been idled and drastically downsized. Alpha Natural Resources, a producer of metallurgical coal and iron and low-sulfur thermal coal in the Appalachian region, has lost 85 percent of its market value this year. On  July 20 alone, Alpha's share price fell 29 percent.

Norfolk Southern reports a decrease in coal volumes by 21 percent in its most recent quarterly report. Coal revenues were $453 million in second quarter 2015, or about 33 percent lower compared with the second quarter of 2014.

In a recent interview with Bloomberg Business, Union Pacific CEO Lance Fritz attributed coal revenue declines to hefty stockpile inventories at utility plants and competitive natural gas prices. The Omaha-based Class I railroad reported a 31 percent revenue decrease in coal shipments during its second quarter of 2015 and has about 1,200 employees on furlough.

Other workforce reductions across the U.S. rail system are attributed to a reduction in oil drilling and a grain harvest that is returning to normal levels. Crude-by-rail and grain shipments were at record highs in 2014 and those record volumes required additional manpower. U.S. railroad employment rose by 3,385 workers to 166,204 in 2014, the highest level since 2007, according the AAR and Census Bureau data.