
A ship docks at Norfolk Southern's Lamberts Point coal terminal in Norfolk, Va. Exports have been a bright spot for U.S. coal producers as domestic coal demand has remained pressured. |
U.S. coal exports are reportedly being considered as a path to reducing the country's international trade deficit with China, and a state that solidly backs President Donald Trump might particularly stand to benefit.
China is considering boosting its purchases from West Virginia as it heads into trade talks with U.S. Commerce Secretary Wilbur Ross in early June, Bloomberg News recently reported, citing anonymous sources. The U.S. Department of Commerce contacted the West Virginia Coal Association earlier this week about Chinese interest in 7 million to 8 million tons of steam coal for a group of power generators in China, the trade association's president, Bill Raney, told S&P Global Market Intelligence on May 31.
"We're glad that they pinpointed West Virginia because that means we'll keep more coal miners working and coal mines open," Raney said.
Ross is scheduled to visit China on June 2-4 as the two countries continue trade talks. The extent to which China might balance its trade deficit with purchases of U.S. coal is not clear.
Raney said a group of Chinese power generators is looking for low-ash, low-sulfur coal that could be supplied by the Northern Appalachia or Central Appalachia mining regions in West Virginia, and he believes that there may be opportunities for sales of metallurgical coal, generally a higher-margin product used to make steel, to China that could also reduce the trade deficit between the U.S. and China.

The state already exports some of its coal to China, but on the whole, the U.S. is a relatively small player in Chinese coal markets. Data from Panjiva shows the U.S. accounted for about $455.0 million of coal into China's $22.15 billion coal import market in 2017, roughly 2% of the total value of China's imports. Comparatively, Australia supplied the country with about $9.82 billion of coal, roughly 44.4% of the total value of coal imports into China.
As recently as 2012, the U.S. had supplied China with $1.19 billion of coal, according to Panjiva data. That figure plummeted to a low of $22.8 million in 2015 but has been rising since.
"China is the world's largest coal importer, and the U.S. only provides a very small share of what they currently import," Energy Ventures Analysis President Seth Schwartz said in a May 30 interview. "Could they increase exports from the U.S.? That's certainly possible."
Increased coal trade between the countries would likely cause some shuffling of coal in the world market, he added, which may limit overall U.S. coal exports. He said the focus on West Virginia may indicate an interest in the metallurgical coal produced by the state. While much of U.S. metallurgical coal goes to India, South Korea and Japan, he said, there is no reason more could not flow to China, which has traditionally been a buyer of lower-quality, low-cost metallurgical coal from the U.S.
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In a recent investor note, Clarksons Platou Securities said companies that stand to benefit from any plans China might make to buy more West Virginia coal include Arch Coal Inc. and Ramaco Resources Inc.
However, Ramaco Executive Chairman Randall Atkins told S&P Global Market Intelligence that he has not yet seen increased interest from Chinese buyers related to the reported news. He said there is a cost differential of about $17/tonne between eastern U.S. metallurgical coal and Australia metallurgical coal sold to China, and he does not believe that China will be a long-term buyer of U.S. metallurgical coal.
"This is basically a soundbite that's coming from China that's been leaked to the U.S. media to create, I think, a kind of perception that the Chinese are trying to do something to be constructive in terms of reducing the overall deficit," Atkins said. "The number would have to be big and the reality of it much more concrete before it has much of an impact."
Atkins added that even several million tons of coal would not do much to move the needle on the trade deficit between the U.S. and China.
The deal would not be the first high-profile deal between China and West Virginia interests. A U.S.-China Clean Energy Research Center focused on technologies for building energy efficiency, advanced coal and clean vehicles was established through West Virginia University during the Obama administration.
In late 2017, China Energy Investment Corp. Ltd announced a memorandum of understanding to invest $83.7 billion in shale gas, power and chemical projects in the state. That deal was among several signed between the U.S. and China after Trump visited the country.
In August 2017, Trump went to West Virginia, a state that overwhelmingly voted for the president, and said the "war on beautiful, clean coal" had ended and coal miners would be "coming back strong."
"The overall positive attitude that's been created since Trump was elected for the coal industry and the need for coal and how beneficial it is as a reliable fuel to make not only electricity but steel — I think that's helped all around. It really has," Raney said. "Everybody has a much better attitude about it."

