Don’t count coal out globally. While battered in the U.S. market, coal is holding its own around the rest of the world, according to BP’s annual “Statistical Review of World Energy,” one of the best annual assessments of the state of energy around the globe.
“Coal consumption increased by 25 million tonnes of oil equivalent (mtoe), or 1%, the first growth since 2013,” according to BP analyst Spencer Dale. “Consumption growth was driven largely by India (18 mtoe), with China consumption also up slightly (4 Mtoe) following three successive annual declines during 2014-2016. OECD demand fell for the fourth year in a row (-4 mtoe).”
Dale said, “World production of coal increased more strongly (3.2%, 105 mtoe), driven by notable increases in both Chinese (3.6%, 56 Mtoe) and US (6.9%, 23 Mtoe) output. Interestingly, the increase in US production came despite a further fall in domestic consumption, with US coal producers instead increasing exports to Asia.”
In Mongolia, Reuters reported that the government has plans to privatize a portion of its state-owned company that owns the “giant Tavan Tolgoi coal mine,” a metallurgical coal producer. The news service said, “The potential initial public offering comes as the country looks to kickstart the long-delayed development of one of the world’s largest coking coal deposits, with international coal prices picking up after years in the doldrums.”
Also, the Mongolian government is looking to build a major, $1 billion coal-fired power plant near the mine, with an estimated 7.4 billion tonnes of reserves, along with a 247-km rail line to the Chinese border. At the same time, Australian coal company TerraCom reports that it has found a major new discovery of met coal in Mongolia, suitable for surface mining.
Met coal has been a bright light for the U.S. in the dismal world-wide coal market in recent years. U.S. met coal exports have been particularly aimed at supplying the Chinese steel-making industry. The U.S. has long been a dominant met coal producer.
In the U.S., coal has continued its decade-long slide, particularly in demand for steam coal for producing electric power. This is despite the Trump administration’s so-far inchoate pledges to keep uncompetitive coal-fired power plants from shutting down. Bloomberg reported that Trump’s plan to save faltering coal-fired capacity “hasn’t altered” many generators’ plans to shut their coal-fired plants. Xcel Energy CEO Ben Fowke said, “I will tell you it is not a matter of if we are going to retire our coal fleet in this nation, it’s just a matter of time.” Even Ohio-based FirstEnergy, an impetus behind Trump’s rescue coal mantra, still plans to shut four coal units and three nuclear plants, a spokesman told Bloomberg.
FERC Commissioner Rich Glick said, “Certainly, I think right now utilities are considering going forward with retirement plans as is. It’s pure economics. Gas prices are way down, renewable projects are getting much less expensive and they are beating out other technologies in the market.”
Ironically – perhaps an illustration of the law of unanticipated consequences (or, alternatively, a result of incompetent analysis) – Trump’s recent actions have the potential to hurt domestic coal. Exports of met coal have been a positive for U.S. trade with China, the world’s largest steel producer, for years. China is followed in the list of steel producing countries by Japan, India, and the U.S., according to the World Atlas.
Trump’s trade war with China has prompted the Chinese government to say it will impose retaliatory tariffs on U.S. goods flowing to China in response. Those retaliatory tariffs could include U.S. met coal.
Reuters reported, “At least three U.S. coal shipments on their way to China may end up casualties of the escalating trade dispute after Beijing said it would impose steep tariffs that may kick in before the ships reach their destinations.” According to the Energy Information Agency, U.S. met coal exports grew by more than 33% between 2016 and 2017. China has substantial domestic production of steam coal.
— Kennedy Maize