Tue September 17, 2013
What Does the Future Look Like for Coal Exports From Kentucky?
As U.S. consumption of coal declines, it’s led to economic problems in some of the country’s coalfields—most notably, Appalachia. For the past few years, the buzzword from the coal industry has been “exports:" relying on a rising demand for coal in countries like China and India to help cushion the blow to the region’s economy.
But a recent New York Times article reports that coal companies themselves are dialing back their expectations when it comes to exports. Prices have been dropping, and several big projects have been canceled or delayed. (The big Kentucky deal to ship coal to India for the next 25 years is one of those that’s been delayed.) But the NYT article pins the changing attitude toward coal in China as the main factor causing pessimism in the export market.
For most of the last decade, China’s soaring thirst for energy accounted for more than 50 percent of world coal demand, driving up international coal prices and stimulating mining activity across Australia, Indonesia and as far away as Colombia and South Africa. With Australia and Indonesia straining to produce for China, South Korea and Japan increasingly looked to the United States for future supplies, stimulating interest in the building of several export terminals in Oregon and Washington State and on the coast of the Gulf of Mexico.
But over the last few months those hopes appear to be receding with a reshaping of global coal markets. After years of mounting imports of coal to fuel its growing economy, China has taken a number of steps to slow those imports. It has modernized domestic mines, made coal-fired electricity plants more efficient and stepped up development of nuclear and renewable power.
Add those issues to last week’s announcement from the Chinese government of a ban on new coal-fired power plants in three of the country’s biggest cities to help control air pollution.
So, what do these issues mean for Kentucky? In an interview with Kentucky Public Radio last week, Kentucky Coal Association President Bill Bissett was optimistic about the role international exports will play in propping up the state’s coal industry. “China by 2030 is going to be using nearly 5 billion tons [of coal],” he said. “India is making a leap in many ways from the 19th century to the 21st century and they’re going to do that mostly through coal-fired electricity. You’ve got a lot going on overseas that creates opportunities for us.”
Kentucky’s coal exports are increasing, according to data from the Kentucky Energy and Environment Cabinet. The most recent data available is from 2011, but here’s a look at how coal exports compared to coal production statewide:
Here's the same for Eastern Kentucky:
And for Western Kentucky:
But here’s another graph: one with all the data from 2001 to 2011. Though the tonnage of coal Kentucky sent out of the country did increase—overall, and in both coalfields—it’s still a small percentage of the state’s total coal production.
Coal exports still have a long way to go before they make up any meaningful share of Kentucky's coal production. And if countries like China begin scaling back their plans for new investments in coal-fired power plants, that could hurt the industry's prospects overseas.