Norfolk Southern (NYSE: NSC) is closing a distribution center in Roanoke, Virginia, citing declining coal volumes and a leaner locomotive fleet.
The company will be closing the Roanoke Distribution Center and plans to transfer the work of the center’s locomotive shop to its Juniata Locomotive Shop in Altoona, Pennsylvania. About 85 shop mechanical employees will have the opportunity to transfer to Altoona, Norfolk Southern (NS) said on Feb. 18. Nineteen clerical positions will be eliminated, but the furloughed workers will have the opportunity to apply for available positions elsewhere.
The Roanoke Distribution Center will continue to operate through April 18, while personnel will remain at the Roanoke Locomotive Shop through May 18.
“We maintain a long-standing affiliation with the Roanoke area and the many generations of highly talented men and women who have worked for NS in Roanoke, which makes today’s announcement especially difficult,” the company said in a release. It added that more than 650 people will still remain in Roanoke working for NS.
NS explained its “difficult but necessary decision” as a way for the company to maintain “the right mix of people and facilities” in the right locations. NS noted that the coal tonnage that it ships has slipped by 48% since 2008, while its locomotive fleet has been reduced by 22% since late 2018. Because NS has reduced its locomotive fleet, there is also less volume for locomotive maintenance and repair. As a result, the company could no longer support two separate heavy-repair locomotive facilities.
The closure comes as overall U.S. coal consumption has declined amid cheaper prices for natural gas, a competing fuel source for electricity generation. Meanwhile, lower natural gas prices in Europe are also putting pressure on the export coal market.
“Export thermal coal prices remained at low levels, making it difficult for us to compete globally,” NS Chief Marketing Officer Alan Shaw said during his company’s fourth-quarter earnings call on Jan. 29. NS had noted then that coal revenue fell 21% in the fourth quarter, with revenues for “utility coal” impacted by low natural gas prices, falling seaborne prices for coal and Chinese tariffs.
Meanwhile, NS’s efforts to deploy precision scheduled railroading, as well as lower U.S. rail volumes overall in 2019, have contributed to fewer locomotives needed for rail operations.
The company’s overall headcount level in mid-January totaled 21,840 employees, according to data received by the Surface Transportation Board. This is in contrast to the 26,282 people that NS employed in mid-January 2019.
The decline in employee totals is reflective of an industry-wide drop in headcount totals.