Due to lower freight rates and a decline in domestic demand, U.S. coal exports to China will likely double, reaching 12 million tons in 2012, according to estimates from the United States’ top coal exporter, Xcoal Energy & Resources.
Asian prices for coal are already in decline due to an overflow in supply from previous shipments imported from Columbia and the United States, and it is expected new shipments will send prices even lower.
Shrinking domestic demand, brought on by strict U.S. regulations and competition from cheap natural gas, coupled with dwindling European imports, has caused many U.S. coal sellers to mark Asia as their new primary consumer market.
Ernie Thrasher of XVI international told Reuters in an interview that U.S. demand for thermal coal has been nearly eviscerated and the current regulatory environment is causing utilities to move away from thermal.
Data from the U.S. Energy Information Administration shows that even though coal is still the largest single fuel used for electricity generation, its share of monthly generation dropped below 40 percent in November and December 2011, the lowest level since 1978.
EIA forecasts depict coal demand in the power sector to drop five percent this year to 884 million short tons, the lowest level since 1995, as the fuel’s dominance of the market continues to be threatened by cheap gas flowing from the shale boom.
Even with the increase in exports, competition from Australia and Indonesia to dominate the Asian market will likely make the United States just a marginal player in the steam coal game in Asia.
Until next time,
Nate
