Coal news and updates

Back in 2011, when SSA Marine laid out plans for a major coal-export terminal in Northwest Washington, international markets were on a tear as the demand for coal pushed prices to record levels. 

 

But this summer, export prices have plunged by more than 40 percent, prompting some coal-export projects in Australia to be scaled back or scuttled. 

 

That’s raising new questions about the prospect for large-scale exports from the proposed SSA Marine terminal at Cherry Point in Whatcom County and a second terminal proposed for Longview in Southwest Washington. 

 

Environmentalists, trying to block efforts to turn the region into a center for coal exports, are mounting a major campaign against the projects. 

 

The big drop in export prices reflects an oversupply of coal and diminished demand as China has reduced imports amid an economic slowdown.

 

Some financial analysts suggest coal-export markets face a prolonged downturn that reflects fundamental changes in the markets. 

 

Goldman Sachs, in a research report released earlier this summer, declared that “the window for profitable investment in coal mining (for export) is closing.” 

 

The Longview and Cherry Point terminals combined would have the capacity to export more than 90 million tons of coal a year. 

 

Both terminal projects have to navigate lengthy federal, state and local permit processes before any construction can begin. And developers are hopeful that markets, by then, will have improved. 

 

“The market for any bulk product will fluctuate, but our perspective is that we will be making a long-term investment in Longview. We believe strongly that demand for electricity in the developing world will continue to grow and so will the demand for coal from the United States,” said Ken Miller, president of Millennium Bulk Terminals.

 

Bob Watters, a senior vice president of SSA Marine, which is developing the Cherry Point terminal, said weak coal markets could affect project funding.

 

But efforts to put together a financing deal are still several years away. 

 

“That’s why I don’t get too concerned about what’s going on right now,” Watters said.

 

International prices, as measured by an Australian benchmark that’s considered a key industry indicator, have dipped below $80 a ton this summer. 

 

That’s far below peak prices of more than $140 a ton reached in 2011. At that time, developers were piecing together proposals to export coal from the Powder River basin that runs through Montana and Wyoming.

 

Much of the run-up in prices occurred as China, which has rapidly built coal plants to help power a dramatic economic expansion, bought international coal to supplement its vast reserves.

 

But some analysts suggest that China, in the years ahead, is unlikely to push up prices with a big surge in buying on international markets.

 

“Coal demand in China is about to start falling, and ... the global thermal coal market will never recover,” declared a recent report by Bernstein Research, which provides analysis for investors. 

 

The report predicts China would stop importing coal in 2015 and begin decommissioning coal plants and replacing them with nuclear and renewable-energy plants during the second half of this decade. 

 

The Goldman Sachs report called 2013 a “watershed year for global coal markets,” and predicted that export coal markets will continue to be characterized by ample supply and lackluster demand in the short to medium term — and that prices will eventually be capped at $85 a ton “for the foreseeable future.”

 

Back in 2011, when SSA Marine laid out plans for a major coal-export terminal in Northwest Washington, international markets were on a tear as the demand for coal pushed prices to record levels. 

 

But this summer, export prices have plunged by more than 40 percent, prompting some coal-export projects in Australia to be scaled back or scuttled. 

 

That’s raising new questions about the prospect for large-scale exports from the proposed SSA Marine terminal at Cherry Point in Whatcom County and a second terminal proposed for Longview in Southwest Washington. 

 

Environmentalists, trying to block efforts to turn the region into a center for coal exports, are mounting a major campaign against the projects. 

 

The big drop in export prices reflects an oversupply of coal and diminished demand as China has reduced imports amid an economic slowdown.

 

Some financial analysts suggest coal-export markets face a prolonged downturn that reflects fundamental changes in the markets. 

 

Goldman Sachs, in a research report released earlier this summer, declared that “the window for profitable investment in coal mining (for export) is closing.” 

 

The Longview and Cherry Point terminals combined would have the capacity to export more than 90 million tons of coal a year. 

 

Both terminal projects have to navigate lengthy federal, state and local permit processes before any construction can begin. And developers are hopeful that markets, by then, will have improved. 

 

“The market for any bulk product will fluctuate, but our perspective is that we will be making a long-term investment in Longview. We believe strongly that demand for electricity in the developing world will continue to grow and so will the demand for coal from the United States,” said Ken Miller, president of Millennium Bulk Terminals.

 

Bob Watters, a senior vice president of SSA Marine, which is developing the Cherry Point terminal, said weak coal markets could affect project funding.

 

But efforts to put together a financing deal are still several years away. 

 

“That’s why I don’t get too concerned about what’s going on right now,” Watters said.

 

International prices, as measured by an Australian benchmark that’s considered a key industry indicator, have dipped below $80 a ton this summer. 

 

That’s far below peak prices of more than $140 a ton reached in 2011. At that time, developers were piecing together proposals to export coal from the Powder River basin that runs through Montana and Wyoming.

 

Much of the run-up in prices occurred as China, which has rapidly built coal plants to help power a dramatic economic expansion, bought international coal to supplement its vast reserves.

 

But some analysts suggest that China, in the years ahead, is unlikely to push up prices with a big surge in buying on international markets.

 

“Coal demand in China is about to start falling, and ... the global thermal coal market will never recover,” declared a recent report by Bernstein Research, which provides analysis for investors. 

 

The report predicts China would stop importing coal in 2015 and begin decommissioning coal plants and replacing them with nuclear and renewable-energy plants during the second half of this decade. 

 

The Goldman Sachs report called 2013 a “watershed year for global coal markets,” and predicted that export coal markets will continue to be characterized by ample supply and lackluster demand in the short to medium term — and that prices will eventually be capped at $85 a ton “for the foreseeable future.”

 

 

Source: seattletimes.com