Hey, kids! Check out our new video explaining why coal exports in the Pacific Northwest have become such a huge financial risk—with many blue-chip investors abandoning the space, leaving the field to risk-hungry, high-flying international speculators.
For those of you who don’t have the patience for a 3 minute video, here’s the short version:
- In early 2009, China’s growing coal consumption outstripped its production—transitioning from being a net coal exporter to a net importer, which made huge waves throughout the Pacific Rim coal markets.
- Over the next two years, as China’s coal imports continued to grow, prices on the Pacific Rim seaborne coal markets skyrocketed, as power companies in Japan, South Korea, Taiwan, and China all competed for a limited supply of coal on the seaborne markets.
- Rising Asian coal prices convinced a bunch of North American coal companies that there was good money to be made in the Asian coal market. So they started making ambitious coal export plans, including 6 new terminals in Oregon and Washington, as well as 3 terminal expansions and one new terminal in British Columbia.
- But everyone else in the market noticed the high prices too. Australia and Indonesia launched massive new projects to boost their coal exports. China started to modernize its coal industry by boosting production from low-cost mines and eliminating transportation bottlenecks that had kept coal from getting from the interior to the coast. Meanwhile, Chinese demand growth moderated.
- So when coal supply soared and demand growth sputtered, prices came back down to earth. And the Northwest’s coal export projects no longer look that lucrative. Three in Washington and Oregon have already folded, some investors have fled…and the remaining projects appear to be hanging on by a thread, hoping that prices will rise again.
Well, that probably took as long to read as the video would have taken to watch…but however you like to get your information, you now have a concise summary of the Asian coal bubble—and the financial mess it’s left for coal export plans. Share it with your friends!
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Huge thanks to Meaghan Robbins for filming and editing the video and spearheading the project, and to Devin Porter of GoodMeasures.biz for charts and graphics!