A recent Today in Energy from the US Energy Information Administration (EIA) analyses the destination for US coal exports from 2007 to 2012. According to the report, Asia's share of total US coal exports increased from 2% in 2007 to 25% in 2012 with almost of all of this going to the worlds top four coal importers: China, Japan, India and South Korea.
However, although US coal has been gaining market share in Asia, it still only provided less than 4% of Asia's coal imports in 2012 and less than 1% of total coal consumed by the four large Asian importers.
Growing coal exports to Asia contributed to the all-time monthly record for total U.S. coal exports in March, accounting for more than half of the total growth over March 2012 exports.
US coal exports: analysis
Both structural and cyclical forces have driven the growth of US coal exports to Asia in the past five years. Companies in key parts of the US coal supply chain – both producers and railways – have increased sales to Asia because of rising Asian coal demand, overall strong export prices, and lower US consumption of coal to produce electric power.
Further, occasional factors such as supply disruptions in other coal-exporting countries have also provided a temporary boost to US coal exports. For example, exports to China of US metallurgical coal during Q1 2013 were more than double their 2012 level, largely because of higher metallurgical coal demand from China against the backdrop of lower supply from Mongolia resulting from contract disputes.
Coal exports to China and South Korea have grown particularly fast, although exports to India and Japan have also grown. Metallurgical coal accounted for two-thirds of the growth in the past five years, while thermal coal accounted for the remaining third. While metallurgical coal export growth has been more evenly distributed among the four countries, thermal coal export growth has been driven mostly by South Korea and China.
The EIA also noted a trend in the ports through which the export coal was shipped, depending on whether it was metallurgical or thermal coal. Metallurgical coals were mainly shipped through East Coast and Gulf of Mexico ports, while thermal coal exports mainly went through West Coast ports and the Gulf of Mexico.
In the past few years, thermal coal exports exiting through the Pacific northwest, a key outlet for Powder River Basin coal, have been primarily destined for South Korea.
US coal exports: growing but still small
Despite recent growth, US coal exports remain a relatively small source of supply to the Asian coal markets. The EIA notes that US coal faces strong competition from other suppliers to the region, especially Indonesia, Australia, South Africa and Russia in the thermal coal market and Australia, Canada and Russia in the metallurgical coal market. In the past two years, Mongolia has also become a major supplier of metallurgical coal to China, adding to the competition in the metallurgical coal market.
The Today in Energy
reports highlights four key areas that will set the pace of US coal exports to Asia: the pace of Asian coal demand growth; expansion of US port infrastructure; especially on the West Coast; coal pricing in Asia; and the cost of US coal landed in Asia compared to that offered by other major coal exporters.
Written by Jonathan Rowland.