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Alt Text

Investors Are Turning Their Back On Coal

Investors are increasingly looking away…

Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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U.S. Coal Miners Find A New Buyer In Asia

An Important shift is now underway in global coal trade. With a completely new export route opening up for U.S. producers over the last few weeks.

To South Korea.

Platts reported yesterday that coal buyers in Korea have seen a surge of bookings for U.S. thermal coal. With sources telling the news service that 1.5 million tonnes of total U.S. supply have now been arranged for delivery between July and September.

This isn’t just a one-off transaction either. With all five of Korea’s utilities having reportedly booked U.S. exports for Q3.

That big shift for Korea’s coal buyers is happening largely due to changing regulatory rules. With a new tax regime on coal imports into Korea scheduled to take effect as of April 1.

The new tax rules favor imports of lower-calorie coal — with the 5,000 kcal/kg mark being an important financial threshold for buyers. Under the revised tax scheme, coal shipments less than 5,000 kcal/kg will be assessed import duty of 27,000 won per tonne ($24.30/t).

By contrast, shipments between 5,000 and 5,500 kcal/kg will be taxed at 30,000 won/t ($27/t), while coal above 5,500 kcal/kg will see a rate of 33,000 won/t ($29.70/t).

All of which means that Korean buyers want coal below 5,000 kcal. But not too much so, as really low-value supply won’t be as functional in power generation.

U.S. coal fits that bill perfectly. With American producers putting out a 4,850 kcal/kg product that attracts the lowest tax rate but still provides a lot of energy per tonne. Related: Can Big Oil Survive A CO2 Crackdown?

That ideal market position looks set to create a mini-boom for U.S. exports into Korea. With the 1.5 million tonnes booked so far this year already representing a 43 percent increase on U.S.-sourced shipments for all of 2016 — when Korean buyers brought in just 1.05 million tonnes for the entire year.

That could give a lift to some U.S. miners. Particularly those in Wyoming and Montana, which have ready access to Pacific Coast export terminals such as Canada’s Westshore facility. Watch for more import deals being struck, and for figures on rising Korean demand for American product.

Here’s to a window opening.

By Dave Forest

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Leave a comment
  • Rico on April 08 2017 said:
    This might have had potential under TPP, but that particular treaty is gone and unlikely to come back. The tariff that this article references is a hike in tariffs for less efficient forms of coal. While that means Korean coal plants will have to shift to highly efficient coal (from places like Wyoming) in the short run, it also means that those very plants are going to be less cost competitive with renewables, which will be subsidized by those very tariffs.

    This is not good news for American coal. It means that Wyoming is going to temporarily get a larger slice of an ever shrinking pie.

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