trending Market Intelligence /marketintelligence/en/news-insights/trending/tmgufb5f-i0bbmpzaitmna2 content esgSubNav
Log in to other products

 /


Looking for more?

Contact Us
In This List

China to impose tariffs on coal; US coal mulls alternatives for future

Blog

Global M&A Infographic Q1 2021

Blog

Q1 2021 Global Capital Markets Activity: SPAC IPOs, Issuance in Consumer Discretionary Sector Surge

Blog

COVID-19 Impact & Recovery: Private Equity

Blog

Utility sector progressing on gender diversity, but experts say more work needed


China to impose tariffs on coal; US coal mulls alternatives for future

China fired back in its growing trade dispute with the U.S., announcing 25% tariffs on $16 billion worth of American exports, including coal, oil products and liquefied petroleum gas. Beijing's Aug. 8 announcement was likely a retaliation to the United States' Aug. 7 announcement of new duties on imported Chinese products, which also totaled $16 billion and go into effect Aug. 23. The U.S. exported nearly 2.1 million tons of coal to China in the first quarter of 2018, a 6.3% year-over-year increase from 2017, according to data compiled by S&P Global Market Intelligence.

Ben Nelson, Moody's senior credit officer and lead analyst for its coal portfolio, said in an Aug. 8 interview with S&P Global Market Intelligence that the Chinese tariffs on metallurgical coal could have a negative impact on U.S. producers, but ultimately it's "too early to tell" how trade tensions will affect the coal industry.

Tariffs aren't the only thing that might prove troublesome for the sector, as the U.S. Energy Information Administration said it expects natural gas to provide the lion's share of the nation's electricity through 2019. Despite fierce support for coal from the Trump administration, industry representatives indicated at a recent gathering that they are still seeking strategies to address the challenges facing the sector. "[Coal] got a reprieve, an opportunity for a second chance to assess itself and see how it can earn a permanent get-out-of jail pass," panelist Luke Popovich, former spokesman for the National Mining Association, said during an Aug. 7 session at the American Coal Council's Coal Market Strategies conference in New Mexico. "The question to me is how does coal use this new opportunity, this new lease on life."

Two videos from Life:Powered, a not-yet-public campaign, were screened Aug. 7 at the conference, demonstrating the coal industry's push to revamp its public image. The videos are part of a new campaign from a group of fossil fuel industry representatives that aim to sell coal, gas and oil as a technology-friendly solution to global energy poverty that is already entrenched in the day-to-day lives of much of the developed world. Popovich told conference attendees that the concept that coal is important has already lost a lot of value in the public marketplace of ideas. Salvaging its image, he said, will require a new approach that includes accepting climate change as an issue that needs to be addressed.

Disruptive automation and digitization technologies could be the key for U.S. coal companies hoping to compete with other fuels and lower-cost sources of coal from the rest of the world. Simple technology such as shuttle cars for transporting coal underground or large-scale surface mining led to huge increases in productivity since the early days of mining. Automation is anticipated to be a key development for mines of the future, along with drones, 3D printing, wearable technologies and advanced data analytics.

During an Aug. 9 session at the American Coal Council conference, Conrad Stewart of the National Tribal Energy Association, an organization that promotes tribal energy and natural resources development, said that "the sleeping giant has awoken and we want to work with industry." While issues like the development of the Dakota Access pipeline seem to pit the U.S. energy sector against Native American interests, members of some tribes say they are eager to cash in on their vast fossil fuel reserves. Stewart said 25 Native American reservations contain coal reserves. The Crow and Northern Cheyenne alone control 10 billion and 23 billion tons of coal reserves, respectively, and the Hopi and Navajo tribes share 21 billion tons of coal reserves.

Ramping up coal production seems to be a viable move as miners show bullish future outlooks due to export possibilities. Coal production from the top producers in the Illinois Basin was 4.9% higher in the second quarter compared to a year ago, but declined 1.3% compared to the first quarter of the year. "Despite weakened domestic demand, U.S. exports have continued to benefit from robust seaborne pricing," Peabody Energy Corp. President and CEO Glenn Kellow said on a July 24 earnings call. "Total U.S. exports are up 32% compared to the prior year with thermal exports increasing 48% through May. While [Central Appalachia] continues to be the largest source of export supply, Illinois Basin exports have increased nearly 60% year over year."