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US Slumping Coal Exports Threaten Rail And Ocean Shipping Demand

Coal News - Published on Wed, 12 Jun 2019

Image Source: The Economic Times
Freight Waves reported that foreign buyers of US coal threw a lifeline to America's embattled mines in 2017-18. As domestic demand dwindled in the face of environmental regulation and competition from natural gas, export markets helped fill the gap, giving the coal industry a much-needed boost. But the tide has turned in 2019. The export lifeline is being at least partially withdrawn, and a more pronounced decline could ensue in 2020, compounding the coal miners' domestic travails. Slumping coal exports also bode ill for the transportation sector for the US rail industry, which counts coal as its largest bulk commodity; for the inland barge sector, which shuttles coal from the Midwest to the US Gulf; and for oceangoing dry bulk vessels, which carry America's exports to terminals in Europe, South America, North Africa and Asia.

The pivotal question ahead is whether this year's slide is a one-off or just the beginning of a long-term secular downward trend. To answer this question, FreightWaves interviewed Mr Joe Aldina, manager of global coal analysis at S&P Global Platts Analytics. The good news is that Aldina does indeed see short-term transitory factors in play. The bad news is that he's not optimistic on US exports in the medium term.

The export trend had been quite strong until very recently. According to data from the US Energy Information Administration, US coal exports totaled 54.6 million metric tonne in full year 2016, surged 61 percent to 88 million tonne in 2017, then rose another 19 percent to 104.9 million tonne last year. Coal is divided into two primarily categories metallurgical coal, also known as ‘met' or ‘coking' coal, which is used for the production of steel, and thermal or ‘steam' coal, which is used for power generation.

With production declining over this period due to lower domestic consumption, exports of coal, particularly steam coal, rose in importance. US export volumes represented just 8.1 percent of production volumes in 2016. Last year, they accounted for 15.3 percent.

In the first four months of this year, long-haul exports to the top four Asian destinations totaled 10.8 million tonne, down 2.5 million tonne or 19 percent, whereas shorter-haul exports to the top 13 Atlantic Basin and Mediterranean destinations in Europe, South America and North Africa totaled 16.5 million tonne, down 570,512 tonne or 3 percent.

CountryJan-April 2017Jan-April 2018Jan-April 20192019 vs 20182019 vs 2017
South Korea265748330488951961968-35.6-26.2

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Posted By : Rabi Wangkhem on Wed, 12 Jun 2019
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