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WSJ: The USA Should Place Their Stake on Coal Exports

The demand for coal in the USA pushed down due to excess of the natural gas in the domestic market and strict environmental standards. Therefore, for American coal companies, the export of their products is gaining importance. It is expected that in 2014 in the USA coal supplies abroad will exceed 100 million tons already for the third consecutive year.

Last year, the American coal company Alpha Natural Resources opened an office in London due to the growing demand for this natural resource in Europe. Some countries of the Old World now try to abandon nuclear energy, and gas in the region is expensive, so the number of coal-fired power plants is increasing. Currently, the [coal] exports are growing faster, especially from the Central Appalachians (the mountain system in the east of the USA),"  - Ted Pyle, Alpha Natural Resources, said.

However, it is risky just to hope for export to the USA companies. Trying to avoid excess coal in the US domestic market, they supply their products to the world market. But there is also no shortage in supply for us, and this negatively affects prices. Over the past three years, coal prices used in the energy sector have fallen from about $ 130 per ton to $ 80.

The United States have strong competitors represented by Indonesia, Australia and Russia, which are closer to the Asian markets. For example, delivery of coal from the United States to Asia increases its cost by $ 50 per ton, and Australian companies can deliver it twice as cheap. As a result, American coal companies have to focus on closer markets, for example, in Europe and Brazil. So, in 2013, coal exports from the USA to China decreased by 15.4%, and to Germany and the Netherlands, on the contrary, increased by 8.3 and 12.8%, respectively.

Consol Company has been involved in coal mining over 100 years. Exactly it owns the only coal export terminal in Baltimore, privately owned by the coal company. The other four terminals on the East Coast are owned (often jointly) by railway, logistic and coal companies. Other American coal companies also pay to Consol to use its terminal as well. Last year about 10 million tons of coal were exported from the terminal in Baltimore. Bob Hodge, an IHS Energy analyst, notes that the capacity of this terminal is 15 million tons, so Consol can dramatically increase exports where it is needed.

Supply of coal abroad enables Consol to save the US market of excess supply and keep prices in the USA at an acceptable level. "We do not want to manipulate prices," - James McCaffrey, Marketing Vice-President, says.  - We intend to bring maximum profit to our shareholders and follow our marketing strategy."

ArcelorMittal metallurgical company has its own coal mines in the USA, Russia and Kazakhstan, as well as 318 million tons of reserved coal.  But for its plant in Brazil it procrures coal from Consol, because its own terminal allows this coal company to offer favorable prices for shipment of cargo. "We make decisions on procurements based on price and quality, regardless of the place from which the delivery is made," - Bill Stiers, ArcelorMittal, notes.

According to the analysts, despite the fears associated with the environment, coal will remain the basic fuel in the world; therefore, its export will be profitable for a long time. "There are about 2 billion people in Asia who need more energy, so over time, more coal from the United States will get to the world markets," -  Matt Preston, Wood Mackenzie analyst, believes.

Translated by: Alexey Nevelskiy

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Photo: George Frey/Bloomberg