Wednesday, March 27, 2013

World Coal Consumption Driving Demand For U.S. Coal

The demand for U.S. coal has been an anticipated boon to an industry struggling to maintain some semblance of regular demand for its product. From stringent pollution regulations and a domestic boom in natural gas production, there was little reason to be hopeful for U.S. coal.

Enter the world’s top growing industrial steel powers. For countries like South Korea, Brazil and Japan, who are at the top of the list of steel-producing nations, the waning U.S. domestic coal demand has been a huge benefit that feeds their insatiable hunger for coal.

Data from the U.S. Energy Information Administration (EIA) showed the dollar value of U.S. net coal exports has increased more than three-fold since 2005. While coal exports declined slightly in 2013 compared with the previous year, they’ve been rising dramatically since the beginning of the 21st century. The U.S.’ biggest coal customer is Europe, which accounts for 50% of exports, followed closely by Asia.

The numbers on any given day at one of the key coal-exporting ports can be eye opening. On one day, 134,000 tons of coal checked out of one U.S port headed to South Korea, where it will feed the blast furnaces belonging to Posco, the world’s fifth largest steelmaker.

That same day at the same port, another ship with 30,000 tons of coal was headed for Brazil and the world’s top steelmaker, ArcelorMittal. That ship waited for workers to finish loading their bounty, a job that would take place after the workers completed filling rail cars with coal destined for Japan’s Nippon Steel & Sumitomo Metal Corp. There are only six ports that handle more than 95% of coal exports and with increased volumes, the infrastructure is pushed to the max.

As environmental restrictions and abundant natural gas reduce coal consumption in the States, exports have become more important for U.S. mining companies. The U.S. coal shipments outside the country in 2014 are expected to surpass 100 million tons.

“Although coal trade only accounts for about 5% of trade flows in energy fuels, the volume of U.S. coal exports has steadily increased, from 50 million short tons (MMst) in 2005 to a record 126 MMst in 2012,” the EIA wrote.

The U.S. coal market has a growing list of challenges that push it to look overseas for consumers of coal. Rising natural gas production has driven a decline in U.S. coal demand and the Environmental Protection Agency’s (EPA) new regulations could force many coal-fired power plants to shut down.

Those same challenges that have put a damper on the U.S. coal consumption volumes are not an issue in other countries that are far too focused on generating power for their growing populations or adding more infrastructure to their formerly sparse footprints. The last thing those coal consumers want is less of the affordable power source the U.S. is so willing to provide.

A survey of the entire U.S. coal-consumption sector shows a significant decline in coal use in every sector. The U.S. electric-power industries used 649 million short tons of coal last year compared with more than 1 billion short tons in 2007.

For the American worker employed in U.S. coal, the future may be bright for exports but not so bright for the environmental issues those targets for growth may encounter down the road.