Coal by Kentucky Photo File used under CC BY-NC-ND 2.0
It’s been a fast and furious few months on the Northwest coal export front—and almost all of the news has been bad for the coal industry’s hopes to ship coal from the Northwest to Asia:
- International coal prices remain near multi-year lows. After a slight uptick earlier in the year, benchmark thermal coal prices have fallen back to where they were in the depths of the global recession. Adjusted for inflation, they’re the lowest they’ve been since early 2007. And the future market holds out little hope for a rebound: prices for the Pacific Rim key coal market benchmark remain below $60 per ton through 2021.
- Chinese coal demand continues to shrink. Five years ago, market analysts believed that China’s boundless coal demand would buoy coal prices for decades. But Chinese policymakers, increasingly concerned about air pollution and industrial overproduction, have enacted a variety of policies to curb coal consumption—from coal import tariffs to provincial coal reduction targets to a nascent cap-and-trade system. Those policies appear to be working: total coal consumption in China fell nearly 3 percent in 2014 compared with the prior year, and first quarter results from 2015 suggest a year-over-year sales decline of nearly 5 percent. Coal consumption in electric power plants fell 10 percent year-over-year in the first quarter of 2015, even as Beijing announced that it would be closing all of its major coal-fired power plants by the end of 2016.“90% of US #coal production is uneconomical at today’s prices”
- Chinese coal imports are plummeting. A large share of the decline in China’s coal consumption comes from falling imports: total coal imports into the country fell 41.5 percent, year-over-year, in the first quarter of 2015. That’s roughly equal to all of South Korea’s coal demand simply disappearing from the Asian seaborne coal market.
- A strong dollar hurts US exporters, but bolsters competitors. Long-term declines in the Indonesian rupiah, the Australian dollar, and the Russian ruble have bolstered the competitive financial position of key US coal export competitors.
- Key US coal exporters are losing money on exports. Coal exporter Cloud Peak Energy—the Powder River Basin producer best situated to benefit from the coal trade—recently announced that it expected its export division to suffer $35 million in export losses in 2015. Last year, the company’s CEO said that it needs to see Newcastle prices in the $80-90/ton range to break even on exports. The combination of weak demand, oversupply, unfavorable policies, and a strong dollar have made it virtually impossible for US thermal coal producers to compete in Asian markets.
- North American coal exporters are feeling the heat. Teck coal—a major metallurgical and thermal coal exporter operating in BC and Alberta—announced that it had missed earnings targets and is now trimming dividends to conserve cash. China’s sagging coal demand weighed heavily on Teck’s disappointing earnings. Meanwhile Arch Coal, co-owner of the Millennium Bulk Terminals export project in Longview, Washington, posted a $113 million loss for the first quarter, again weighed down by poor international prices—news that sent its shares tumbling.
“Just four years ago, the US coal industry was riding high on rising international demand and strong prices. It’s almost astonishing how quickly King Coal’s fortunes have collapsed.”
International financial headwinds are pushing against North American coal exporters, but the domestic scene is ugly too. Bloomberg recently reported that 90 percent of US coal production is uneconomical at today’s prices. The New York Stock Exchange warned coal giant Alpha Natural Resources that it could be forced to pull the company’s stock from the exchange if it couldn’t maintain stock prices above $1 per share. Meanwhile, Reuters has reported that Alpha may lack the funds to meet its mine cleanup obligations—an issue that affects Alpha mines in both West Virginia and Wyoming and could be a huge drain on the company’s dwindling capital.
Just four years ago, the US coal industry was riding high on rising international demand and strong prices. It’s almost astonishing how quickly King Coal’s fortunes have collapsed.
Florence
Coal is the dinosaur of fuels. It’s dying off rapidly. Renewable energy is the path to the future: wind, solar, and water. I live on an island west of Seattle,WA. We have probably half a dozen families who live entirely “off the grid”: build the house out of hay bales..build a good windmill for power..and a deep well for water..and a large container for collected rain water for all but drinking water. Use compost commodes and use in gardens. For many it’s a way of life..and takes up a lot of time each day..but you can live on very little income without much pain!
David Moore
Stopping the increase in worldwide coal burning is only the beginning to slow global warming. Coal exports are continuing to China and the other Asian huge coal consumers from Australia, Russia, as the Sightline article mentions. This additional carbon dioxide is overwhelming all US and European attempts to decrease carbon emissions. China, India, south Korea, Taiwan, etc must be sent a stronger message to decrease coal burning. The future of the planet’s weather is at stake for billions of people and hundreds of species.
Alvan Rigby
What you are saying about increased burning of coal from countries such as China, Taiwan,South Korea will definitely have a negative impact on global warming. The sad reality is that many countries cannot think ahead when it comes to the environment and many more countries in S E Asia and Africa are joining them. Perhaps our only hope is more research into producing CHEAP and RELIABLE renewable energy and/or eficient and low cost carbon sinks.