CSX Declines Most Since December 2008 After Coal Forecast Cuts

CSX Corp. (CSX), the biggest railroad in the eastern U.S., fell the most since December 2008 and smaller rival Norfolk Southern Corp. (NSC) also tumbled after two coal companies cut their forecasts.

CSX slid $1.64, or 8.1 percent, to $18.59 at 4:15 p.m. in New York Stock Exchange composite trading while Norfolk Southern dropped $5.61, or 8.3 percent, to $61.93. Union Pacific Corp. (UNP), No. 1 in the U.S. by sales, also declined.

Coal is the largest commodity by volume for the big U.S. railroads. Walter Energy Inc. (WLT) reduced its second-half sales forecast today, citing delays at mines in British Columbia and Alabama. Alpha Natural Resources Inc. (ANR) pared its outlook for full-year production because of a drop in Asia demand and lower- than-expected output at some mines.

“That’s a point of evidence that the global economy is slowing down,” Peter Tuz, who helps manage $1 billion as president of Chase Investment Counsel Corp. (CXS) in Charlottesville, Virginia, said in a telephone interview. “One of the real strengths of the market of the last few years has been the upward push of commodities driven by global demand.”

Union Pacific tumbled $5.31, or 6 percent, to $83.07. Union Pacific, Jacksonville, Florida-based CSX and Norfolk Southern make up the Standard & Poor’s 500 Railroads Index, whose drop today of 7.1 percent was fifth-worst among industry groups in the benchmark gauge and the steepest since 2008.

Across the Board

Today’s decline erased the railroad index’s advantage over the S&P 500 this year. The railroad index has fallen 9 percent, compared with 7.2 percent for the S&P 500.

Walter Energy, based in Birmingham, Alabama, and Abingdon, Virginia-based Alpha Natural Resources both produce so-called metallurgical coal, which is used by steelmakers.

Norfolk Southern, based in Norfolk, Virginia, has seen no indication that “across-the-board demand is softening for export metallurgical coal,” Chief Financial Officer James Squires said today at the Citi Global Industrials Conference in Boston. Customers are expecting the U.S. to be a greater supplier to the global market than it has been, he said.

Customers of Omaha, Nebraska-based Union Pacific want more coal deliveries to bolster their supplies, finance chief Robert Knight said at the conference.

To contact the reporters on this story: Ed Dufner in Dallas at edufner@bloomberg.net; Natalie Doss in New York at ndoss@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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