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Gulf Coast welcomes rejected coal exporters

When it comes to exporting American coal, the West Coast’s loss is the Gulf Coast’s gain.

While environmental opposition stymied plans to build terminals in California and the Pacific Northwest, the Mississippi River town of Darrow, La., has a new $300 million export facility. It’s part of an expansion that will increase capacity by 66 percent to 119 million metric tons by 201, according to New York-based Doyle Trading Consultants LLC.

At least $898 million, or 64 percent of the total $1.4 billion companies such as Ambre Energy Ltd. were planning to invest on the West Coast, is being spent on terminals in the Gulf of Mexico. Even as American coal exports have fallen by 23 percent since 2012, producers are betting foreign sales will rebound because a supply glut means prices are below competing cargoes from Australia and South Africa.

“In some parts of the U.S. you have the lowest cost coal in the world,” said Carlos Fernandez Alvarez, a senior coal analyst at the International Energy Agency in Paris. “If you have the infrastructure to export that coal it will be competitive in many scenarios.”

Exports from Galveston, Texas, surged 29-fold since 2000 while volume in Mobile, Ala. doubled and New Orleans saw a more than 15-fold increase, government data show.

Bountiful gas

The United States is poised to use less coal because of increased energy efficiency, tighter environmental regulations and bountiful natural gas supplies as a result of the shale drilling boom.

The country’s 5.2 percent jump in coal consumption last year should reverse as at least 32 coal-fired power plants are retired, Energy Department data show. President Obama proposed in June to cut carbon dioxide pollutants by 30 percent by 2030 from 2005 levels, mostly by reducing the use of the fuel.

Coal is the country’s most abundant energy resource, with enough reserves to last 180 years. That compares with 87 years for natural gas and 88 years for crude oil, government projections show.

Exports will increase 33 percent to 128 million tons by 2020 and 148 million by 2030, the Energy Department forecast in its 2014 Annual Energy Outlook.

Producers will seek a greater share of the 8 billion ton world market, Kevin Crutchfield, chief executive officer of Alpha Natural Resources Inc., the biggest U.S. producer of metallurgical coal, said in a Sept. 30 interview in New York.

Global glut

China, which accounts for about half of global demand, will increase consumption by 6 percent annually in the next two years before easing to a pace of 2 percent growth, according to Jeff Archibald, a senior technical specialist at ICF International Inc., a Fairfax, Va.-based analytical company.

A global glut contributed to the decline in American exports. While the seaborne market for coal has increased to a record 1 billion tons, it will take at least two years for the surplus coal to be absorbed, according to IHS Inc., an Englewood, Colo.-based researcher.

Benchmark Australian coal prices dropped 26 percent to $62.10 a ton this year, South Africa fell 19 percent to $67.55 and Colombia declined 8.1 percent to $62.50, data compiled by Bloomberg show. Coal on the New York Mercantile Exchange has lost 10 percent to $51.60 a ton.


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