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Metallurgical, or coking, coal exports expected to decline

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By John D. Oravecz
Wednesday, Nov. 6, 2013, 12:01 a.m.
 

Overseas demand for coal used in steelmaking is expected to grow by more than 30 percent in the next two decades, but most will come from Australia and other countries as higher-cost exports from the United States decline.

Demand for metallurgical, or coking, coal used to come from China and India, but India will surpass China as the largest user, experts said on Tuesday at the Met Coal World Summit 2013 in the Omni William Penn Hotel, Downtown.

China's steel industry appears destined to decline because of real estate overbuilding that cannot be sustained, among other factors, said Philipp Englin, CEO of researcher World Steel Dynamics in Englewood Cliffs, N.J.

“It's our view that this machine could come to a grinding halt within three years,” Englin said. “It would not surprise us.”

Exports of met coal slowed recently but remain at historically high levels, said Jim Truman, analyst with Wood Mackenzie in Annapolis.

Overall met coal demand will rise from 261 million tons in 2012 to 394 million tons by 2035, Truman predicted. Asian growth will account for about 92 million tons; domestic, South American and European demand will account for the rest. China's demand will peak by 2025 and decline by 2035 as its growth in steel disappears, he said.

U.S. exports likely will be priced out of the market as Australian met coal re-enters the market, Truman said. Recent growth in U.S. exports of met coal “was largely due to our position as a swing supplier,” he said.

In 2011, Australia's coal industry was disrupted when floods washed out key rail and road links. Water swamped mines in Queensland state, paralyzing operations that produced 35 percent of Australia's exportable coal.

A U.S. decline in met coal exports would place more strain on a coal industry hit hard by dropping demand for steam coal, the low price of natural gas and the Obama administration's push to use cleaner-burning natural gas and renewable power sources.

Consol Energy Inc. has high hopes for the export market. Its recent $3.5 billion deal to sell five West Virginia mines that produce coal for power plants to Murray Energy Inc., a St. Clairsville, Ohio, coal producer, did not include four export-oriented mines: the Bailey and Enlow Fork mines in Greene County, the Bailey Mine Extension (BMX) slated to come online in spring, and the Buchanan Mine in Virginia, which produces mainly metallurgical coal.

Rep. Tim Murphy, R-Upper St. Clair, said strict environmental policies could affect even met coal mining.

“There is a bright future for coking coal,” he told the several hundred coal and steel industry executives. “Win-at-all-costs environmentalism that helped cut coke production in America by 75 percent in the last 40 years could eliminate the final 25 percent if we're not careful.”

Demand for met coal from India will overtake China in the late 2020s, Truman said. But its main suppliers will be Australia, Mozambique, Russia and Canada.

U.S. exports are expected to decline by 15 to 20 percent, he said. Met coal exports from the United States rose from about 15 million tons a year between 2002 and 2006, then grew to about 55 million following Australia's floods.

During the past five years, growth in the world steel industry has been nil, expect for China, which grew this year at about 6 to 7 percent, Englin said. The potential for decline in exports rests with whether China can continue to absorb its steel output, used mainly to build apartments.

Yet a slowdown in China could help overall steel production in the United States by reducing Chinese imports, Englin said.

John D. Oravecz is a Trib Total Media staff writer. Reach him at 412-320-7882 or joravecz@tribweb.com.

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