Exports of coal rise, aid industry

Struggling sector ahead of ’16 page

A shake-up in global coal trading has delivered some oxygen to the struggling American mining industry, driving up exports to energy-hungry countries.

U.S. coal sales abroad over the first three quarters of the year surpassed exports for all of 2016, according to government figures. Energy experts project an increase of 46 percent for the full year, adding more than $1 billion to coal companies' revenue.

Those are crucial dollars for an industry trying to stabilize itself after nearly a decade of declining prices, expanding competition from natural gas and wind and solar energy, and bankruptcies. Domestic coal-fired power plants continue to close despite promises of regulatory relief by President Donald Trump's administration, making the exports all the more critical.

The upturn in exports has been particularly helpful to Appalachia, where production is up 11 percent this year. Coal executives attribute the increase mostly to exports, especially of coal for making steel, known as coking coal.

Alpha Natural Resources, which came out of bankruptcy in 2016 and exports half of its coking coal production, opened a new mine this year in economically depressed West Virginia, employing 35 workers. In Virginia, several privately held coal companies are adding shifts and drilling new mine sections for the first time in five years to export more coking coal.

"Exports are certainly an opportunity for growth," said John Stranak, the treasurer at Cloud Peak Energy, a major producer in Wyoming and Montana. "Pricing for exports is outpacing sales domestically. The growth in that arena is certainly where we would like to focus."

With global prices for coal depressed through most of 2016, Cloud Peak Energy dropped exporting entirely until the final months of the year. In 2017, the company expects to export 4.5 million tons of thermal coal -- the variety used for power and heat -- to South Korea, Japan and Taiwan, and 5.5 million tons in 2018.

Coal mining jobs, declining for years, have increased slightly this year, to 51,200 in November from 50,000 in January, according to the Bureau of Labor Statistics. That was down from 80,000 coal workers only nine years ago. The export surge has also bolstered the revenue of coal-carrying railroads such as BNSF, CSX and Norfolk Southern and increased business in ports around the country.

Roughly 10 percent of the nation's coal production goes toward exports, although the country also imports some coal. National coal production has increased 8 percent this year above the same period of 2016, with much of that increase attributable to exports.

Industrialists and utilities in India have especially taken a liking to heat-intensive coal produced in West Virginia and surrounding states. But countries importing considerably more American coal also include China, Brazil, Mexico and Germany.

The relief, however, is only partial. Exports this year will still be roughly 37 million tons below what they were in 2012, when they peaked at 126 million tons. The benefit may also be temporary, since this year's increase has been driven at least in part by events overseas.

A cyclone knocked out mines and railroad lines and interrupted coal deliveries for months after hitting Australia in March, forcing China and other Asian countries to turn to the United States to replace lost coking coal. Australian production and exports are slowly returning to normal. Producers in Indonesia, another major Asian exporter, had idled several important mines in response to falling prices but are reversing course as prices rise.

The most lasting change -- at least potentially -- has come in China, which in 2016 decided to cut mine production capacity and rely more on natural gas. The government feared that many inefficient coal companies would go bankrupt, resulting in mass layoffs and financial stress for state-owned banks that lent them money.

A 15 percent production cut this year increased local coal prices by 40 percent, according to the International Energy Agency, leading to surging imports and higher global prices.

But how much China will continue to import remains an open question, with some officials pushing for import controls. A surge in coal imports in India is also in some doubt, as the country builds more railroads between its mines and power plants, and as the government pushes forward with plans for greater use of solar energy.

In the United States, coal has been helped by a recent rise in natural-gas prices. But older coal plants continue to close as utilities switch to gas and renewable energy. Vistra Energy announced in recent months that it would soon close three coal-fired plants in Texas, as that state relies more on natural gas and wind and solar energy. Together, the plants supply enough electricity for roughly 4 million homes.

Business on 12/14/2017

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