With Australia coping with the aftermath of Cyclone Debbie and China turning back imports of coal from North Korea this week as apparent punishment for missile tests, U.S. coal exports could take up some slack. But analysts aren’t predicting a coal comeback.
After banning imports of North Korean coal in late February, China started turning shipments away this week. Reuters reports that millions of tons of coal were sent back to North Korea. Largely, these were shipments of anthracite coal, typically used in steel production. S&P Global Market Intelligence’s coal reporter Taylor Kuykendall is skeptical that this event will produce significant effects here in the US.
“[Anthracite coal] is a really small part of our market and not produced that many places in the United States outside of Pennsylvania,” Kuykendall said.
Coal producers have hoped that exports for steelmaking in China could prop up declining demand for coal in the US. But Kuykendall says U.S. - China relations aren’t yet developed in a way that would guarantee any additional exports.
“I think there are a lot of political hurdles between China and the Trump administration that we haven’t heard a lot about yet,” he said.
This month’s storm has interrupted coal shipments from Australia as well, briefly increasing demand for U.S. coal. Such disruptions of supply from Australia have led to spikes in coal prices in past years, but analysts aren’t predicting lasting effects this year.
“Most people that are looking at long-term investment aren’t really changing their forecasts,” Kuykendall said. “I don’t think the surge in prices that we’ve seen over the last week or two is something that can be sustained throughout the whole year.”
Met Coal Bets
Many U.S. companies bet big on metallurgical coal in 2010 and 2011 expecting the Chinese steel industry it supports to continue to surge. But instead demand tapered off at home and abroad, leading to a wave of bankruptcies. Regional companies including Patriot Coal, Arch Coal, Peabody Energy, and Alpha Natural Resources all filed for bankruptcy protection.
Production data from the U.S. Mine Safety and Health Administration does indicate that both coal production and employment have increased so far this year. Some mines report production increases of 20 percent compared to this time last year - and a 6 percent increase in employment.
Kuykendall reports that “three of Murray Energy Corp.'s Northern Appalachia mines have significantly boosted production over the year-ago period. The company's Marshall County, Harrison County and Marion County mines boosted production 27.5%, 30.8% and 160.7%, respectively, year over year.”
But Kuykendall says the overall downward trend in the coal industry is still likely to continue.
“Coal production and employment has been rising for the last nine months or so, but I think we’re going to see that level off and maybe even start declining again unless there’s a significant change in natural gas prices.”