coal exports, including metallurgical coal, have made steady
inroads into the Asian market since 2007, with metallurgical
coal accounting for two-thirds of that growth in the past five
But a U.S. commodities
analyst suggests that growth will fade over the course of the
U.S. coal exports are
"likely to fall meaningfully" in the second half of the year,
Cowan & Co. equities analyst Daniel W. Scott said during
the IHS McCloskey Coal USA conference June 19-21 in New
In a June 24 report
summarizing the conference, Scott said this expectation was the
largest takeaway from the event.
"Speakers from Walter
Energy (Inc.) to Peabody (Energy Inc.) ... noted that the
global seaborne coking coal market is oversupplied, even with
current benchmark at $172 (per tonne)," he said.
The U.S. Energy
Information Administration (EIA) projects that U.S. coal
exports this year will dip slightly from their 2012 highs, but
will still surpass 100 million tonnes for the third straight
year, reaching 110 million tonnes. Annual exports were 125.7
million tonnes in 2012 and 107.3 million tonnes in 2011.
Increased Asian demand
contributed to record U.S. coal exports in March 2013. Exports
for the month totaled 13.6 million tonnes, beating the previous
peak in June 2012 by nearly 0.9 million tonnes. Met coal
accounted for 54 percent of March 2013 coal exports.
Asia has taken an
increasingly large share of U.S. coal exports in recent years,
at 25 percent in 2012 vs. 2 percent in 2007.
Almost all U.S. coal
exported to Asia went to the worlds top four coal
importers: China, Japan, India and South Korea, the EIA has
Both structural and
cyclical forces have driven the growth of U.S. coal exports to
Asia in the past five years. Companies in key parts of the U.S.
coal supply chainboth mine and railroad
operatorshave boosted sales to Asia due to rising demand
and strong export prices.
One-off events like
supply disruptions in other coal-exporting nations have also
provided a temporary boost to U.S. exports. American exports of
metallurgical coal to China during the first quarter of 2013,
for example, were more than double 2012 levels, the EIA stated,
largely because China had contract disputes with Mongolian
coking coal producers.
Coal exports to China
and South Korea have grown particularly fast, although exports
to India and Japan have also grown.
Nearly all U.S.
metallurgical coal exports to Asia in 2012 were shipped from
ports on the East Coast and the Gulf of Mexico.
Despite recent growth,
U.S. metallurgical coal exports remain a relatively small
source of supply to Asia because of strong competition from
suppliers in Australia, Canada and Russia. In the past two
years, Mongolia has become a major supplier of coking coal to
China, adding to competition in the market.
U.S. coal exports will
cool and prices will fall due to excess supply, Scott said.
"A likely met coal
benchmark drop below $150 (per tonne) f.o.b., with potential
for a slow recovery, likely puts additional large swaths of
production out of the money, especially for lower-quality
material," he said. "We believe exports are likely to fade. Met
coal producers need to batten down the hatches as prices
languish at unhealthy levels."