Terminal problem

WHILE 25% of US coal exports are going to Asia, they are but a small share of Asia’s total coal imports. Perhaps building some terminals in the Pacific Northwest would change this dynamic.
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Noel Dyson

Asia’s share of total US coal exports leapt from 2% in 2007 to 25% in 2012.

While US coal is gaining Asian market share, it provided less than 4% of Asia’s coal imports in 2012 and less than 1% of total coal consumed by the four large Asian importers.

The lack of dedicated coal export infrastructure in the Pacific Northwest will hamper US attempts to grow that market share.

Ports there, which would allow the loading of cape-size ships, would put the US in pretty much the same boat as Australian producers. Steaming time from the Pacific Northwest to most Asian ports is near that from Australia’s east coast, where its coal comes from.

At the moment, most of the US coal exports are going in much smaller Panamax-sized vessels that have to transit through the Panama Canal to get to Asia.

Coal is a bulk commodity, so it makes sense to have the biggest ships possible to move it.

That will not happen without some big changes in the Pacific Northwest.

Coal producers have had a win, with the US Army Corps saying it is going to assess the three proposals in the Pacific Northwest on their individual merits. This means it will not be looking at cumulative issues relating to them or, more puzzlingly, on how the burning of coal shipped from those ports will effect global warming.

According to the US Energy Information Administration, US coal exports have been making steady inroads into the Asian market since 2007.

Almost all the US coal exported to Asia went to the world’s top four coal importers of China, Japan, India and South Korea.

Growing coal exports to Asia contributed to the all-time monthly record for total US coal exports in March, accounting for more than half the total growth over March 2012 exports.

Both structural and cyclical forces have driven the growth of US coal exports to Asia in the past five years.

Companies in key parts of the US coal supply chain – both producers and railways – have increased sales to Asia because of rising Asian coal demand, overall strong export prices and lower US coal consumption for electric power production.

Occasional factors such as supply disruptions in other coal-exporting countries have also provided a temporary boost.

For example, the EIA said US metallurgical coal exports to China during the first quarter of 2013 were more than double their 2012 level. This was largely because of higher metallurgical coal demand from China against the backdrop of lower coking coal supply from Mongolia to China due to contract disputes.

Coal exporters to China and South Korea have grown particularly fast, although exports to India and Japan have also grown.

EIA figures show metallurgical coal accounted for two-thirds of the growth in the past five years and steam coal accounted for one-third.

While metallurgical coal export growth has been more evenly distributed among the four countries, steam coal export growth has been driven mostly by South Korea and China.

Nearly all metallurgical coal exports to Asia in 2012 were exported from ports on the east coast and the Gulf of Mexico.

However, most US exports of steam coal to Asia were exported from ports on the West Coast and the GoM.

In the past few years, steam coal exports exiting through the Pacific Northwest, a key outlet for Powder River basin coal, have been primarily destined for South Korea.

Despite recent growth, US coal exports remain a relatively small source of supply to the Asian coal markets.

It faces strong competition from other suppliers to the region, especially Indonesia, Australia, South Africa and Russia in the steam coal market and Australia, Canada and Russia in the metallurgical coal space.

In the past two years, Mongolia has become a major supplier of coking coal to China, adding to the competition in the metallurgical market.

According to the EIA, future growth of US coal exports to Asia will depend on the pace of Asian coal demand growth, expansion of US port infrastructure, especially on the West Coast; and the cost of US coal landed in Asia compared to that offered by other major coal exporters.