One of the largest haulers of US coal says fossil fuels have no future, despite pledges to the contrary from President Donald Trump.
CSX, a freight railroad company with origins in the bituminous coal seams of Appalachia, will not buy a single new locomotive to pull coal trains, chief executive Hunter Harrison told analysts on Wednesday.
“Fossil fuels are dead,” Mr Harrison said. “That’s a long-term view. It’s not going to happen overnight. It’s not going to be in two or three years. But it’s going away, in my view.”
His comments come as the White House aims to revive the American coal industry by rescinding environmental regulations and abandoning the Paris climate agreement. Mr Trump surrounded himself with coal miners earlier this year when he signed an executive order he said was “putting an end to the war on coal”.
Yet US power generators are building more plants fuelled by cheap natural gas, displacing old coal-fired units. Falling costs for solar and wind energy have also eaten into coal’s market share.
North American railroads have reshaped their asset holdings in acknowledgment that coal’s apex has passed.
Lance Fritz, chief executive of the Union Pacific railroad, said in a recent interview that Mr Trump’s move to scrap Clean Power Plan regulations was unlikely to grow its coal business. “It takes away a headwind," he said.
Nearly a fifth, or $530m, of CSX’s $2.9bn of second-quarter revenue came from coal, a 27 per cent rise from the same period a year before. In the second quarter of 2011, CSX coal revenue totalled nearly $1bn.
CSX’s rise in coal volumes derived from 8.2m tonnes of exports. Deliveries of coal to US utilities declined year on year to 11m tonnes. Despite long-term trends, Mr Harrison reiterated his support for the business. “The last carload of coal that’s shipped out of this country, I want to be the carrier that ships it,” he said.
Mr Harrison, a legendary railroad manager, joined CSX in March after he was recruited from his job running the Canadian Pacific railway by an activist hedge fund, Mantle Ridge. CSX shareholders last month agreed to reimburse him $84m in money he forfeited when he left CP.
CSX reported net profit of $510m, or 55 cents per share, in the second quarter, up 15 per cent from $445m, or 47 cents per share, in the same period a year before.
But investors drove the company’s shares down 6.1 per cent to $51.31 as they queried how quickly Mr Harrison will deliver on his promises to raise performance. “It is hard to deny that CSX's second-quarter results came in below elevated expectations,” Barclays wrote.
Mr Harrison said he was not going to buy locomotives or double-track CSX’s routes to accommodate coal. “Coal is not a long-term issue,” he said.
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