The US will export more than 100 million short tons of thermal coal annually by 2030 and could reach 300 million st in an extreme scenario, an analyst said, with India as the primary country driving the market.
Several coal producers, citing statistics from agencies such as the Energy Information Administration, told attendees at the Platts Coal Properties and Investment conference in Fort Lauderdale, Florida, that China's growth will reinvigorate a slumping US coal industry.
But India will grow faster and is far less self-sufficient than China, according to McKinsey & Co. partner Eugene Smit.
"It's been interesting to listen to people talk about the global coal boom and that it's all about China and then India. We would actually reverse that and say it's firstly about India and secondly about China," Smit said. "We don't see China becoming much bigger users of the seaborne market until after 2030."
India's utilities are largely deregulated, Smit said, creating a vibrant industry for coal-fired power plants.
But state-owned Coal India cannot keep pace with demand. Its mines average just 2 million st/year of production and difficult mining conditions limit the amount of potential expansion.
Stifel Nicolaus managing director Paul Forward echoed Smit's projections, saying Chinese demand over the next 10 years will not reach levels seen in the last decade because of an aging workforce and increasing domestic coal production.
China's population in the 35- to 49-year-old age range will drop 1.5% per year through 2021, Forward said, and similar population structures experienced previously in other countries the US in the 2000s and Japan in the 1990s triggered slower growth.
"I think something central to investor concerns surrounding coal is, what if our major growth driver stalls out?" Forward said. "Because China is so large, what comes next?"
Improving mine conditions and more efficient transportation will make China less dependant on the seaborne market over the next decade, Smit said. But China's coal reserves are believed to be three times smaller than the US, making analysts believe that it will eventually run out of coal.
That scenario, combined with full build-out of US West Coast coal terminals and a tempered carbon policy, prompted Smit to say the US could export 300 million st/year of thermal coal.
"It's a big number," Smit said. "But our long-term view is the market easily grows to 100 million on the thermal side and it's not unreasonable to think more port capacity makes that number even bigger."
Last year, the US exported 37 million st of thermal coal and 107 million st overall. Forward projects that the US will export around 102 million st of coal in 2012, with thermal increasing to 40 million st.
Source: Darren Epps, Platts