US ramps up coal exports to China, Japan, South Korea in Q4'21

Coal exports from the U.S. to China skyrocketed year over year in the fourth quarter of 2021, putting the country at the top of the list of major destinations of U.S. coal.

U.S. coal exports to China totaled 3.0 million tons in the final quarter of 2021, nearly tripling the 1.0 million tons shipped to China in the fourth quarter of 2020, according to S&P Global Market Intelligence data.

The second-largest buyer of U.S. coal abroad during the period was India, but the country reduced its coal purchases by 20.8% compared to the prior-year quarter. Overall, quarterly U.S. coal exports rose 16.2% year over year as tight supplies of coal drove up global demand.

Coal demand from China

In late 2021, China faced a supply shortage of coal, with a trade dispute preventing Australian producers from selling coal into China. As China's demand for coal continues to grow, U.S. producers are placing tons into that market. During the second quarter of 2021, exports from the U.S to China jumped 30-fold compared to the second quarter of 2020.

China has been increasing its overall coal consumption as well as imports of the fuel, even as it has made indications of moving away from coal to fulfill climate change pledges. While historically high, coal exports to China dropped 20.5% quarter to quarter.

Peabody Energy Corp. President and CEO James Grech pointed out that increased industrial demand is driving up broader electricity demand and higher natural gas prices are pushing utilities to use more coal.

"Seaborne thermal and metallurgical coal markets are expected to remain robust in the near to medium term as supply challenges coincide with a period of elevated demand," Grech said during a Feb. 10 earnings call.

Coal exports surge

Overall, U.S. coal exports increased in 2021, including a 4.8% bump in volumes from the third quarter to the fourth quarter. Compared to the previous year, the U.S. saw a big boost in coal volumes sent to Japan and some substantial increases in shipments to the Netherlands and South Korea. In addition to India, coal shipments to Canada and Brazil also declined significantly.

World demand has been tight. Earlier in 2022, Indonesia resorted to a temporary ban on exporting coal until its local supply levels improved.

"The supply side has been impacted from not only the Indonesian ban, but we see nobody building new coal mines because of the difficulty to raise funding and to get approvals for coal mines," Gary Nagle, CEO at diversified miner Glencore PLC, said during a Feb. 15 earnings call.

The conflict between Russia and Ukraine may also impact the availability of gas and further increase demand for U.S. thermal coals, Alan Shaw, president of railroad company Norfolk Southern Corp., said during a Feb. 22 conference.

"There's a lot of opportunity in the coal market," Shaw said. "I still consider it a bubble, so we're guarded in our outlook."

The U.S. Energy Information Administration forecast in its latest short-term energy outlook that coal exports will increase by 3 million tons, or 4%, in 2022 due to high international coal prices.