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US coal exports drop 7% YOY in Q4'20; China emerges among top importers

U.S. coal shipments to some of the country's top importers increased significantly in the fourth quarter of 2020, with China recording a triple-digit uptick amid its escalating trade dispute with Australia.

Total U.S. coal exports during the three-month period fell 7.3% year over year to 17.4 million tonnes from 18.8 Mt, according to an analysis by S&P Global Market Intelligence. Compared to the previous quarter, the U.S. shipped 25.1% more of the commodity from October through December 2020.

Despite the year-on-year slowdown, the quarterly exports figure "slightly" exceeded Moody's projection for the period, reflecting some recovery in coal pricing in the second half of 2020, Moody's Investors Service analyst Benjamin Nelson told Market Intelligence.

"Demand for thermal and metallurgical coal was hit hard by diminished demand for electricity and steel, respectively, after the coronavirus spread globally," the rating agency wrote in an October 2020 note. "Most coal companies still have negative outlooks in response to cash burn, weakened liquidity, and significant uncertainties surrounding the prospect of a modest recovery in domestic and international coal prices in 2021."

Six of the top 10 U.S. coal terminals by volume had a significant slowdown year over year in shipments during the last quarter of 2020 and five posted decreases of 15% or more.

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Coal terminals in Los Angeles and Detroit booked the biggest year-on-year decreases in seaborne shipments in the fourth quarter of 2020. Los Angeles terminals shipped 135,000 tonnes of coal, dropping 64.1% from the prior-year period, while Detroit terminals recorded a 37.9% decrease in shipments to 90,000 tonnes.

Shipments from terminals in New Orleans and Seattle decreased by 35.6% and 32.7%, respectively, year on year, while coal shipments from terminals in Norfolk, Va., fell 15.1% to 6.0 Mt.

Meanwhile, terminals in Mobile, Ala., recorded the highest increase in coal shipments with 2.8 Mt in the fourth quarter of 2020, 32.5% higher year over year.

While more than half of the top 20 destinations for U.S. coal received fewer deliveries during the final quarter of 2020 compared to the prior-year period, destinations such as China, India, Dominican Republic and the U.K. received higher deliveries of the commodity.

India, the most popular destination for U.S. coal, imported 3.6 Mt in the December 2020 quarter, increasing 55.0% year over year and 68.7% quarter over quarter.

Consol Energy Inc. President, CEO and Director James Brock said higher petroleum coke prices drove the increase in deliveries to the South Asian country.

"We continue to see strength in pet coke prices resulting from reduced oil production, which is propping up demand and pricing for [Northern Appalachia] coal and high [calorific value] markets, particularly India," Brock said during a Feb. 9 earnings call.

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China recorded the highest surge in coal exports from the U.S. for the three-month period, outsourcing 1.0 Mt of coal. The figure represents a 251.8% increase year over year and a 748.2% increase quarter over quarter. The jump in U.S. deliveries to the Asian country came amid its ban on Australian coal imports and other diplomatic tensions.

China's state-owned utilities and steel mills received verbal notice from customs early in the fourth quarter of 2020 to stop importing Australian thermal and coking coal. This prompted state-owned utilities Huaneng Power International Inc. and Huadian Power International Corporation Ltd. to cancel three vessels of high-ash Australian thermal coal in October 2020.

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While the Chinese directive shut the door for Australian coal miners, it presented opportunities for other major producers including the U.S.

"Increased exports to China reflect trade issues and higher pricing in China, which created an opportunity for U.S.-based producers to ship to China," Nelson said.

The ban triggered an increase in China's import volumes from other origins across different grades of metallurgical coal, according to Jeffery Lu, managing editor of S&P Global Platts' metallurgical coal and coke segment.

"Most market participants are looking at the status quo of such diversified supply structure, at least until China lifts its import ban," Lu said in early February.

Meanwhile, Réal Foley, senior vice president of marketing and logistics with Canadian diversified miner Teck Resources Ltd., said the ban weighed on seaborne coking coal demand in 2020.

"In China, as a result of the ban, we've seen a large increase in seaborne coking coal imports in 2020 to the second-highest level on record at 49 million tonnes," Foley said during a Feb. 18 earnings call. "That compares to 60 million tonnes in 2013, which was the highest level, and that was an increase of 8 million tonnes year over year."

Foley noted that it is unclear when the import ban will end. "In the meantime, what we are seeing and taking advantage of is the price premium for sales into China."

The U.S. Energy Information Agency recently projected a 23% increase in U.S. coal exports in 2021 as various economies emerge from the pandemic and restart activity. The agency expects exports to rise a further 12% in 2022 as market conditions "continue to normalize following the pandemic," while total shipments are still expected to be lower than in 2019.

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S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.