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Coal: A 'Million Dollar Mile' Getting Longer In the U.S.

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By EconMatters

 

With cheap domestic natural gas prices and tighter environmental regulations, U.S. demand for coal has fallen in recent years. So coal export has become ever more important to domestic coal producers. With accelerating growth in economy and power demand, Asia is the obvious new export target for U.S. coal. U.S. coal shipments outside the country in 2014 are expected to surpass 100 million tons for the third year (see chart below). 

 

Data Source: EIA, U.S. Energy Dept.

 

Further Reading: The Power Race: Coal vs. Gas


East, Pacific Northwest, Gulf?

 

Typically, coal is transported via rail, truck to the port terminal and then exported by large dry bulk cargo ships. But the aging port infrastructure in the U.S. is already struggling with capacity issue. The capacity along the east coast is strained with increasing US coal exports to Europe.

 

Map Source: Platts 

 

Theoretically, Pacific Northwest would be the best location for new coal terminals to serve the booming Asian market. The western region (including the Power River Basin) is the top coal producing area in the U.S. according to the U.S. Energy Dept. However, active environmentalism in Washington and Oregon has managed to block almost every major proposal for new coal terminal.

 

Data Source: EIA, U.S. Energy Dept.

Frustrated, coal producers in the Powder River Basin are willing to pay a higher transit fee to use terminals in Vancouver, Prince Rupert, and British Columbia, Canada. But Canadian ports are also having capacity issue handling the surging coal export volume from the U.S. For now, Gulf of Mexico, where local governments and citizens are friendlier to the traditional energy and fossil-fuel industries, seems the best option where additional capacity in the near-term could be more likely.

 

 

China, Europe or South America?

 

As a result, some U.S. producers have shifted to target markets that are closer, such as Europe and Brazil. Europe is implementing more pollution-control measures on power plants to wean itself from nuclear power after Japan’s Fukushima disaster, as well as natural gas to reduce the supply dependency on Russia. In fact, UK was the top foreign buyer of American coal in 2013.

 

 

 

Increasing Global Coal Demand

 

According to IEA, although U.S. coal demand has dropped to 24-year low, the black rock is still the world’s fastest-growing energy source, forecast to rise 2.3 percent a year through 2018 and is the second-largest source behind oil.

 

World Energy Demand by Fuel

Chart Source: Coal Medium Term Market Outlook 2013, IEA 

 

The coal demand growth is driven mostly by non-OECD countries with China leading the way. China is world’s top coal producer, but the nation is also plagued by dangerous coal mining conditions and transport congestion. So China will continue to need more coal to feed its energy requirement. As long as China’s economy holds up, U.S. coal companies should benefit.

 

 

From NIMBY to NIYBY

 

However, a lot of the upside of coal export hinges on new export capacity gets approved and built in the U.S. and ocean bulk freight stays low.

 

Coal companies are eager to pour money into new terminals. Bloomberg reported that Oakland, California just recently rejected a coal export facility proposed by Bowie Resource Partners LLC despite the promise of ‘thousands’ of new construction jobs and a $3 million-a-year payroll in city. The message from Oakland: "Whatever the economic benefit would’ve been, it wasn’t worth destroying the planet over.” (Note: Oakland’s unemployment rate is higher than that of the national average as well as California.)

 

As the environmental cause has evolved from NIMBY (Not in My Back Yard) to NIYBY (Not in Your Back Yard), coal industry needs to address oppositions not only on coal dust from train, but also on potential global climate impact. So even though many producers are hopeful of new export facilities eventually coming online, status-quo seems more likely the near-term outlook.

 

Ocean Freight Could Bite

 

Currently, ocean freight rates are at historical low because of vessel overcapacity. This has allowed US coal to be more competitive in international markets. But freight rate will not stay this low for too long. By then, the U.S. coal will have a difficult time competing with producers in Indonesia, Australia and Russia that are closer to the Asian key markets.

 

According to WSJ, while shipping coal from a U.S. mine to a customer in Asia adds $50 to the per-ton price, Australian producers can get coal from their mines to China and other Asian markets for half that.

 

Near Term Outlook 

 

China will continue to import coal from U.S. mines via Canadian coal terminals operated by companies such as Westshore Terminals Ltd. Westshore has raised its annual handling capacity to 33 million tonnes this year from 24 million tons in 2007 and are sending as much as 3.76 million tons a month abroad.

 

In the U.S., CONSOL Energy (NYSE: CNX) has some export advantage over peers since the company owns the Baltimore Marine terminal.  Bloomberg noted this is the only terminal wholly owned by a coal company in the U.S.  Other coal companies will have to pay fees to CONSOL to use the terminal with 15 million tons a year capacity.

 

Rail companies like CSX (NYSE: CSX), Norfolk Southern (NYSE: NSC), and top U.S. coal companies Peabody Energy (NYSE: BTU), Alpha Natural Resources (NYSE:ANR), and Arch Coal Inc. (NYSE: ACI) also jointly or individually own a few terminals on the East Coast and Gulf of Mexico.

 

Houston-based terminal operator Kinder Morgan (NYSE: KMP) last year said it plans to invest more than $450 million in coal terminal expansion projects. That already caused air quality concerns at Houston Ship Channel among local environmentalists. This suggests U.S. Gulf Coast states may seem more accommodating to oil and gas in the past, the coal dust air pollution problem means new coal facilities may still have a tougher time getting approved.

 

A Million Dollar Mile Awaits

 

The recent trend suggests U.S. regulators are increasingly taking into consideration the global-warming impacts of coal pollution problem in Asia as they decide on new coal terminal proposals. But I see the logic more like this: The law of supply and demand means Asia will get its coal (oil and gas) from somewhere else, if not from the U.S., to feed its energy hunger.  Until Asian developing nations get their environmental standards and regulations together, the global warming impact will go on even if U.S. totally bans all energy export to Asia.

 

Bloomberg said CONSOL employees call a long coal train a "million dollar mile," which is a reference to the cargo's total value at current prices.  For now, until the coal industry can properly address the coal dust air pollution issue and get approvals for new export capacity, the line for the “Million Dollar Mile” could get even longer.

 

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Thu, 05/22/2014 - 15:19 | 4785896 Bemused Observer
Bemused Observer's picture

Burning coal is NOT the answer to our energy issues. It is an archaic, sloppy way to generate power. We've BEEN there, we've SEEN what happens when you depend on coal as your energy source, just read about London in the 18th century. where literally EVERYTHING, including the people, were constantly covered in a greasy film of soot.

There ARE probably ways to 'clean it up', but we aren't there yet. It is sad that the economies of Appalachia have been mislead by their leaders to think that coal is coming back, or that it has much of a future. Instead of driving on and finding a new source of revenue, they are being held back by dreaming of a coal renaissance. And they will keep killing themselves with oxycontin and booze until then...

Yeah, burning coal in your stove at home will keep you warm in the winter, but as an industrial energy source, it isn't feasible.

Thu, 05/22/2014 - 14:04 | 4785502 Smiley
Smiley's picture

We have the ultimate energy advantage over the rest of the world in terms of the energy potential in the US's coal reserves.  So, logically, we are going to make it cost prohibitive to exploit, use, sell, utilize in any way-shape-form for that matter and probably make it illegal to mention using coal for anything that generates energy, income, or creates jobs:  This is progress!?!

Thu, 05/22/2014 - 16:50 | 4786310 Matt
Matt's picture

Or a strategy to hold something in reserve for when everyone else is tapped out.

Thu, 05/22/2014 - 13:31 | 4785381 kurt
kurt's picture

We should keep the coal and decomission nuclear.

Thu, 05/22/2014 - 12:52 | 4785253 disabledvet
disabledvet's picture

Meh. Very contradictory article from "Econ doesn't matter" again. "All exports are going to Asia" but "all exports are in fact going to Britain." Go figure.

No mention of New Orleans either...or of "barge traffic." The shipping on the Mississippi I think it is safe to say can be called "Infiniti." Plus all the electricity needed to power every device imaginable can be had through that river system.

Coal of course is wasted when used for generating giga-watts. It's overwhelmingly a cooking and heating fuel. And exporting a few million tons really is a drop in the bucket. China and the USA consistently produce a billion tons a year.

The fastest grower? Natural gas by far. Coal prices have collapsed as natural gas compounds at 20% a year...and will continue to do so for the foreseeable future.

That's even with a collapse in price in natural gas too.

Of course the collapse in the US economy still overhangs everything as "our ability to export our way out of this" fails to materialize yet again (save for Boeing of course.)

Thu, 05/22/2014 - 11:47 | 4784935 magnetosphere
magnetosphere's picture

coal is surely the most important resource of the industrial age.  usa, uk, germany, russia, china, japan all built empires on coal.  the oil countries saudi arabia, iraq, iran, kuwait, venezuela, angola, libya, not so much.  coal is both the resource of the past and the resource of the future, because there is more of it.

Thu, 05/22/2014 - 09:29 | 4784446 Save_America1st
Save_America1st's picture

U.S. demand has not fallen.  Do you realize the name "obama" did not appear once in this fucking article?  Was the EPA mentioned?  NOPE!

The Marxist, Fascist, treasonous, FAKE global warming enviro-Nazi, Agenda 21-driven, eugenicist, globalist, puppet obama administration has litterally chopped the fucking heads off of the electricity-providing clean-coal industry in order to fuck us all over with sky-rocketing energy costs while consolidating energy power into the few crony, statist energy companies who are partnered with the Fascist scum in D.C.

obama 2009:  Under my plan...electricy rates would NECCESSARILY SKYROCKET.  https://www.youtube.com/watch?v=HlTxGHn4sH4

obama 2009:  If you want to build a coal plant...I'll BANKRUPT YOU.  https://www.youtube.com/watch?v=fVW9g9JVCY4

obama EPA to shut down 280 electricity producing coal plants...this is from a year ago!  http://dailycaller.com/2013/05/03/report-epa-rules-to-shut-down-more-than-280-coal-fired-units/

Daily fucking KOS, Oct. 2013!  http://www.dailykos.com/story/2013/10/13/1245351/-Shutdown-of-150th-coal-plant-reminder-that-miners-and-related-workers-need-a-just-transition

"Unprecedented number of coal plants shut down in 2012"  http://www.naturalnews.com/036672_coal-fired_power_plants_shut_down_EPA.html

April 2014 from the fucking sell-out "supreme" court: 

Supreme Court Upholds EPA Ruling That Will Likely Shut Down Critical Coal Plants

http://www.theblaze.com/stories/2014/04/29/supreme-court-upholds-epa-ruling-that-will-likely-shut-down-critical-coal-plants/

 

We're being de-industrialized.  We're being forced into serfdom.  We're being fucking exterminated.

All this is being done by these fucking treasonous, Fascist, Marxist, sociopaths...destroying America right in front of all our fucking faces.  Every fucking day this shit goes on.  And no fucking sociopath, politi-scum from any so-called "party" has done one fucking thing about it and they never fucking will.

Only the extremely very fucking pissed off and heavily armed people can stop these assholes...but we all have to get off our fucking asses and wipe these cancerous vermin out.  Because they are a fucking cancer and they're eating what's left of America alive right now and we're barely still on life support.

 

Thu, 05/22/2014 - 19:46 | 4786885 Mad Muppet
Mad Muppet's picture

U.S. demand has not fallen.  Do you realize the name "obama" did not appear once in this fucking article?  Was the EPA mentioned?  NOPE!

The Marxist, Fascist, treasonous, FAKE global warming enviro-Nazi, Agenda 21-driven, eugenicist, globalist, puppet obama administration has litterally chopped the fucking heads off of the electricity-providing clean-coal industry in order to fuck us all over with sky-rocketing energy costs while consolidating energy power into the few crony, statist energy companies who are partnered with the Fascist scum in D.C.

 

 

Plus 1 for the spot-on focused rage.

Thu, 05/22/2014 - 10:58 | 4784756 MrBoompi
MrBoompi's picture

At least you admitted all you fucking care about is your electricity bills.  You're just another climate denier who is too stupid to know his ass from a hole in the ground.

Thu, 05/22/2014 - 11:46 | 4784937 Save_America1st
Save_America1st's picture

"climate denier"  HAHAHAHAHA

nobody denies there's climate.  We have hot, cold, rainy, snowy, windy, dry, stormy, and beautifully perfect days all in between.  We know what climate is and we know what the seasons are. 

And why can't tax payers be concerned about skyrocketing electricity bills when the governments are so enthusiastic about charging us massive taxing on carbon fucking dioxide...you know...the rare trace gas that mammals exhale which is then recycled into the ecosystem so that virtually all plant life on Earth can use it to then create...wait for it...wait for it...I know you're stumped...waaaaaaaaiiiiiiiiiiit for iiiiiiiiiiiiiiiiiiit....OXYGEN!!!

Yes, that's right, asshole...oxygen...created by plants for us to breath or we all fucking die.  And without CO2 all plant life would die.  I know it's a fucking mind-blower to you types of full-on retards, but do try to keep up here...

There is no fucking "anthroprogenic" global warming, blah, blah, blah.  This carbon dioxide as a "poisonous gas" LIE, perpetrated by the powers that be who are running a global scam to drive us into poverty and slavery while existing on only what very little the all controlling globalists may "give" us as long as we pay and comply with their demands is all a fucking....wait for it...were you paying attention?  Say it with the rest of us so we know you can read and comprehend simple, basic, logical facts....it's all a:  FUCKING LIE!!!  A SCAM!!! 

You've been scammed, get it???  I know you all hate to admit you've been totally and hilariously scammed and conned by sociopathic scumbags, but face it...own up to it.  Don't just perpetuate the lie because you're too fucking vein or ignorant to admit it so you'd rather take the rest of us down with your dumb asses.  Let it go.  Nobody with an IQ over 75 is ever going to be as totally scammed as you fuck-tards have been scammed into believing this bullshit. 

Got it yet???  CO2 comprises a whopping .03972% of the ENTIRE FUCKING EARTH'S ATMOSPHERE.  I know you can't comprehend that.  But just try to understand that nearly all plant life on the planet fucking DEPENDS on that miniscule amount of rare carbon gas compound in order to exist so that they can then provide us with oxygen to BREEEEEEEEAAAAAATHE.  You know what breathing is, right?  That ugly, repulsive shit you people do with your mouths open while you drool and jerk off over man-bear-pig photos of Al-Fucking-Gore.

So anyway...gosh, it's almost as if there's life cycle going on here that may have started billions of fucking years ago when there was actually MORE CO2 in the atmosphere by far than there is today. 

And water vapor is also NOT a poisonous greenhouse gas either, fuck face, so take that LIE and shove that one right up your ass right along side the CO2 lie and your brainless cranium.

If you enviro-Nazi's really gave a fuck about the planet then do the rest of us all a big fucking favor and fucking kill yourselves.  It's the only right thing to do for mother nature so that you'd be saving us all from your poisonous CO2.  Because the shit that spews out of enviro-Nazi's mouths is the REAL toxic waste on this planet.

 

Thu, 05/22/2014 - 12:05 | 4785024 MassDecep
MassDecep's picture

It's like Celente says, When you dump trillions of pounds of poisons in the environment, it tends to affect the climate. He's talking about fukushima, geoengineering, (chem trailing), spraying the Gulf with dangerous chemicals, and all the other crap Governments are doing or failing to do to protect you and I. Of course these things affect out environment.

http://kerrylutz.libsyn.com/gerald-celente-of-course-you-cant-trust-your...

Thu, 05/22/2014 - 13:13 | 4785314 Save_America1st
Save_America1st's picture

yeah...us "conspiracy theorists" are supposed to look the other way and allow ourselves to ridiculed for bringing up the shitty things the sociopthaths do.  If we care about the environment by bringing up all that shit then we're shut down.  But we're supposed to shut up and let them con the world into paying taxes for the CO2 we exhale???  

They can all go eat shit

Thu, 05/22/2014 - 09:39 | 4784495 tempo
tempo's picture

Mega Russia/China deals covering energy and construction will leave US in the dust so to speak, pandering to the masses w entitlements funded by more and more debt that cant be repaid. All that counts in the US is being PC.

Thu, 05/22/2014 - 08:47 | 4784336 MrBoompi
MrBoompi's picture

We shouldn't export non-renewable resources if we can help it. It seems some people just think they'll last forever. As a national security concern, we should not export oil, natural gas or coal. But I could see how if this policy was implemented in areas like the Middle East it would cause mass starvation and millions or more deaths.

Thu, 05/22/2014 - 11:41 | 4784922 magnetosphere
magnetosphere's picture

it would cause starvation in the middle east for one.  those places need to import food.  they also lack the ability to defend themselves from foreign armies that would show up if they stopped exporting oil

Thu, 05/22/2014 - 07:56 | 4784192 dontgoforit
dontgoforit's picture

I was talking to a friend last night - retired Navy - works for the railroad now for many years.  He said they weren't pulling much coal for a long time here in north GA, but that since around Christmas they've been hauling train-load after train-load to a coal-burning plant in middle GA.  He said the increase was noticable.  So, maybe the coal industry isn't going to go away just yet as the current administration would hope.  Everyone would like a cleaner way of getting heat & lights, but in the absence of 200 more nuclear plants, what can you do?  If it's your house and your family and it's 20F outside, you'll take the heat however you can get it.

Thu, 05/22/2014 - 11:41 | 4784924 Matt
Matt's picture

It is too bad during this last housing boom, making the new houses vastly more energy efficient and better insulated was not a priority. 

We need more energy from coal so we can charge up our environmentally friendly electric cars.

Thu, 05/22/2014 - 01:57 | 4783931 joego1
joego1's picture

No cheap energy = less humans on planet

We will burn it all and we will suffer our collective fate in the long run. The cockroches won't mind though.

Wed, 05/21/2014 - 18:20 | 4782899 deeply indebted
deeply indebted's picture

If it burns, humans will burn it. Won't quit until the Earth is a pile of ash. Idiots.

Thu, 05/22/2014 - 09:27 | 4784462 JRobby
JRobby's picture

Wonder who is flaming this post?

Where is Colonel Jessup?

 

Thu, 05/22/2014 - 12:46 | 4785226 Pootie Tang
Pootie Tang's picture

I am here you toxic radioactive fly ash inhaling, carbon sequestering in your dreams bitchez.   Clean coal is an oxymoron of the nth degree.

Thu, 05/22/2014 - 03:18 | 4783994 terex
terex's picture

The idiots in the enviro-militia u mean? Probably the same guys that will ask why the lights go out

Thu, 05/22/2014 - 00:43 | 4783853 sun tzu
sun tzu's picture

when they stop burning it and the lights go out, the idiots will be asking why

Thu, 05/22/2014 - 03:34 | 4784006 thestarl
thestarl's picture

Does'nt matter we're fucked either way we go.It's only a matter of near or longer term. 

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