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.
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