American Coal: Taking Its Business Where It’s Wanted

Facing increased roadblocks to financial success and growth stateside, the U.S. coal industry is taking its business elsewhere: overseas. Coal exports jumped from a little over 49 million short tons (mmst) in 2006 to 53 million in 2007, according to the National Mining Association, and the New York Times reports that coal executives predict exports of up to 80 mmst for 2008. Quarterly production has generally increased, as well: the U.S. exported 13.5 mmst during the third quarter (July through September) of 2006 to 16.2 mmst during the third quarter of 2007, their highest quarterly level since 1988, according to the Energy Information Administration. Although the falling dollar has contributed significantly to this feeding international frenzy, a whole convergence of global events has led to a trend that does not appear as if it will disappear anytime soon.

This recently heralded growth in American coal exports has arrived partly because of tightened coal supplies around the world. China, the world’s largest consumer of coal, has begun to see its demand outstrip its supply, and actually imported more coal than it exported in January 2007. South Africa, a worldwide coal exporter, has had to focus more on satisfying local demand, because of power outages earlier this year. One of the world’s top coal-producing nations, Australia, has temporarily had to reduce exports as well, in response to domestic flooding.

While American coal may not necessarily be pouring into these countries—the New York Times reports that it is heading toward Europe instead, whose demand has traditionally been satisfied by South Africa and Australia—Europe’s demand is sufficiently high for spot prices of central Appalachian coal, a benchmark grade of American coal, to leap from around $40 a ton in 2007 to over $90 a ton at one point in early 2008. Prices at home look to increase soon, although the shock hasn’t come yet. Considering that legislation in the U.S. is finally leaning more and more toward energy and environmental regulation, domestic coal demand has been considerably constrained. The largest U.S. coal terminal plans to expand staff and operations in order to increase exports from 13 mmst last year to possibly 20 mmst in 2008. Luckily for Big Coal and unluckily for Planet Earth, the vast stores of American coal don’t look like they’ll stay on the back burner for long.

One of the most surprising aspects of this news for me—although it certainly shouldn’t be—is the fact that Europe is contributing greatly to the surge of demand for American coal. Considering that Europe—in particular Germany and Britain, two of the major coal-importing nations—is often heralded as a leader in adopting renewable energy and in mitigate climate change, this news is a reminder that it, too, uses coal—and a lot of it. Still, the story here isn’t that Europe uses coal. This news is also a reminder that coal won’t be going away soon, thanks to its low costs and developing nations’ necessity for cheap energy. Nevertheless, could rising American coal prices ultimately drive the world to seek alternate—and hopefully less polluting—forms of energy?