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US Coal Exports: Swinging Into The Pacific

The areas on the graph show monthly US seaborne coal exports (comprising coking coal and thermal coal including lignite) split by exports to Atlantic importers and Pacific importers (left hand axis). The line shows the monthly average of an indicative benchmark Australian thermal coal price (right hand axis). Timeseries of seaborne thermal and coking coal trade for a number of countries, including the US, are available on the Shipping Intelligence Network.

US Coal On Its Way Out?
Between 2012 and 2016, US coal exports more than halved to 50mt. This drop partly reflected falling coal demand in the US’s key export markets, especially Europe, where the shift towards gas and renewables, as well as pressure on the region’s steel industries, saw demand for steam and coking coal decline. The UK’s imports of US coal fell from 12mt in 2013 to 1mt in 2016, for example. Overall, oversupply in the global coal market, particularly in China, saw one benchmark thermal coal price slump from $80/t in early 2014 to around $50/t by early 2016. The weak coal price environment saw a number of US mining operations close down, while others reduced their output.

China To The Rescue?
However, the story in 2017 was rather different to that of the preceding years. In 2016, the Chinese government undertook an ambitious programme of supply-side reforms in an effort to support coal prices and rebalance the domestic coal market. As a result, 2016 saw thermal coal prices globally rebound sharply, with one benchmark Australian coal price doubling between January and November 2016 to $100/t. Improving Asian coal demand, as well as the disruption caused to Australian coal exports by Cyclone Debbie, also supported coal prices in 2017.

US Back In The Export Game
Rising coal prices restored profitability to a number of US mining operations, with several closed mines reopening in 2017. US coal production looks set to have expanded for the first time in three years, rising by around 9% y-o-y in January-November 2017. Seaborne coal exports grew by 74% y-o-y in the same period to total 75mt, with exports of coking coal up 41% to 42mt, and exports of thermal coal more than doubling to 33mt.

Pacific Shift
Historically, importers in the Atlantic have been the largest market for US coal, with Atlantic importers accounting for an average of 75% of US coal exports in 2014-16. While US exports to Atlantic importers (mainly Europe) did rise by 57% y-o-y in January-November 2017 to 49mt, exports to the Pacific (principally India, South Korea, Japan and China amongst others) more than doubled to 26mt, accounting for 44% of the total increase in US exports. Overall, firm growth in long-haul trade to Asia helped support an estimated increase of around 90% in US coal exports in terms of tonne-miles in 2017.

So, improved coal prices in 2017 saw US coal ‘swing’ back into the global market with gusto. With growth in global coal demand focussed in Asia, US exports to the Pacific also played a more important role. Overall, despite accounting for just 7% of global coal exports, it is clear that the US was at the heart of changing dynamics in seaborne coal trade in 2017.
Source: Clarkson

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