The strength of the U.S. coal export market should continue through the first half of next year, according to Xcoal Energy & Resources President Jack Porco, due in part to the country's flexible role in the Atlantic Basin.
Providing the keynote speech Dec. 5 at the 16th annual American Coal Council's Coal Trading Conference in New York City, Porco offered a "rose-colored" near-term outlook.
He said strong demand for steel would ensure a bigger appetite for coking coal through much of 2018, although he is optimistic about thermal coal as well. Even with an expected dip in activity in the second half, he asserted that the export market would provide the strongest opportunity for growth for U.S. coal producers, especially as domestic demand continues to slide.
Those hoping to make the most of the opportunities, he said, will need to meet new industry demands in the coming year, including greater interest in premium coals and the ability to cope with greater overall volatility.
He attributed the recent strength of the U.S. export market to the industry's role as a "key swing supplier" in the Atlantic Basin, with the infrastructure and flexibility to provide "quick response time to changing market conditions."
Porco, whose company has seen its own export share increase steadily in recent years, said 2017 marked a significant recovery in the export market for U.S. coal producers, but one that began as early as July 2016. He pointed to a series of market factors to explain the recovery, including strong economic growth in Europe and Brazil.
Despite a broader trend away from coal among European Union countries, where demand peaked in 2012, according to Porco, U.S. producers have continued to find some opportunities for exports thanks to supply issues facing France and Germany. However, unless the U.S. can help develop new markets in Eastern European countries, such as Ukraine and Poland, demand in the region could continue to decline, limiting export options in the future.
Porco's comments echoed other industry experts at the annual conference that 2017 had proved to be better than expected for U.S. exports and that the international market would continue to be a growth opportunity into next year.
However, Porco and others warned of lingering "structural challenges" facing the industry with an eye on global markets, most notably policies introduced by governments in China and India.
In China, the government's willingness to intervene in production and import efforts creates uncertainty about long-term trends, with Porco remarking that one could "leave work on Friday and wake up on Monday in a whole new world." Meanwhile, India remains an opportunity yet to fully mature, with significant potential for growing coal demand but a lack of tangible progress in recent years.
Other potential challenges for the U.S. export market in 2018 include ample supply capacity, governmental policies favoring renewables over coal and the lingering threat of competition from natural gas.
