Back in 2011, when SSA Marine laid out plans for a major coal-export terminal in Northwest Washington, international markets were on a tear as the demand for coal pushed prices to record levels.
But this summer, export prices have plunged by more than 40 percent, prompting some coal-export projects in Australia to be scaled back or scuttled.
That’s raising new questions about the prospect for large-scale exports from the proposed SSA Marine terminal at Cherry Point in Whatcom County and a second terminal proposed for Longview in Southwest Washington.
Environmentalists, trying to block efforts to turn the region into a center for coal exports, are mounting a major campaign against the projects.
- Students seeking sugar daddies for tuition, rent
- 6 ways to befriend your bones and fend off osteoporosis
- What's the top spelling 'mistake' in Washington state? The answer could make you sick
- So the NRA sends a questionnaire to a Seattle state senator ...
- Refusal in Bernie Sandersland to accept reality is really unreal
Most Read Stories
The big drop in export prices reflects an oversupply of coal and diminished demand as China has reduced imports amid an economic slowdown.
Some financial analysts suggest coal-export markets face a prolonged downturn that reflects fundamental changes in the markets.
Goldman Sachs, in a research report released earlier this summer, declared that “the window for profitable investment in coal mining (for export) is closing.”
The Longview and Cherry Point terminals combined would have the capacity to export more than 90 million tons of coal a year.
Both terminal projects have to navigate lengthy federal, state and local permit processes before any construction can begin. And developers are hopeful that markets, by then, will have improved.
“The market for any bulk product will fluctuate, but our perspective is that we will be making a long-term investment in Longview. We believe strongly that demand for electricity in the developing world will continue to grow and so will the demand for coal from the United States,” said Ken Miller, president of Millennium Bulk Terminals.
Bob Watters, a senior vice president of SSA Marine, which is developing the Cherry Point terminal, said weak coal markets could affect project funding.
But efforts to put together a financing deal are still several years away.
“That’s why I don’t get too concerned about what’s going on right now,” Watters said.
International prices, as measured by an Australian benchmark that’s considered a key industry indicator, have dipped below $80 a ton this summer.
That’s far below peak prices of more than $140 a ton reached in 2011. At that time, developers were piecing together proposals to export coal from the Powder River basin that runs through Montana and Wyoming.
Much of the run-up in prices occurred as China, which has rapidly built coal plants to help power a dramatic economic expansion, bought international coal to supplement its vast reserves.
But some analysts suggest that China, in the years ahead, is unlikely to push up prices with a big surge in buying on international markets.
“Coal demand in China is about to start falling, and … the global thermal coal market will never recover,” declared a recent report by Bernstein Research, which provides analysis for investors.
The report predicts China would stop importing coal in 2015 and begin decommissioning coal plants and replacing them with nuclear and renewable-energy plants during the second half of this decade.
The Goldman Sachs report called 2013 a “watershed year for global coal markets,” and predicted that export coal markets will continue to be characterized by ample supply and lackluster demand in the short to medium term — and that prices will eventually be capped at $85 a ton “for the foreseeable future.”
Wood Mackenzie, another energy-consulting firm that tracks the coal industry, has a substantially more upbeat outlook. Its researchers predict that Asian demand for coal, as it increases over time, will shore up the export market.
“In the long term, Asian economic growth is still going to be robust, and that is the number-one story,” said Andy Roberts, an analyst for Wood Mackenzie.
By 2035, Wood Mackenzie forecasts that more than 420 million tons of Powder River coal could be exported annually.
Yet even Wood Mackenzie doesn’t predict that exports prices based on the Australian benchmark will bounce back anytime soon.
Their analysts predict the benchmark won’t fetch more than $100 a ton in real prices until 2023 or 2024. Roberts notes that forecast will be revised to reflect lower Asian growth.
The U.S. coal industry also faces uncertainties on the home front, with President Obama calling for new regulations to control carbon-dioxide emissions, which contribute to global warming, from existing coal plants.
In the Pacific Northwest, the proposals are generating one of the more heated environmental battles of recent years, with opponents arguing the region shouldn’t be in the business of exporting a resource that is a major contributor to global warming.
Last week, researchers from three organizations — Sightline Institute, Climate Solutions and Greenpeace — highlighted the downturn in coal markets during a news conference.
“There is no question that the U.S. coal companies need Asian markets for Powder River coal. The key question is, do Asian markets need Powder River coal?” said Ross MacFarlane, a senior adviser at Climate Solutions.
“What is clear is that these companies are betting on, and praying for, a market rise in international prices,” said Clark Williams-Derry, of the Sightline Institute.
One of the major Western coal players in the domestic and international export markets — Cloud Peak Energy — in August opted not to bid to develop 145 million tons of federal coal adjacent to its Cordero Rojo site in Wyoming, a move that surprised some industry observers.
“We carefully evaluated the estimated economics of this … in light of current market conditions and the uncertainty caused by the current political and regulatory environment toward coal and coal-powered generation and ultimately decided it was prudent not to bid at this time,” said Colin Marshall, Cloud Peak’s president and chief executive officer, in a written statement.
It was the first time that a federal tract in Wyoming had failed to draw any bidders.
Rick Curtsinger, a Cloud Peak spokesman, said the decision not to bid on the coal reflected concerns about the ability to profitably mine the coal for sale to U.S. power producers, which would be the primary market for Wyoming coal.
Cloud Peak’s export coal comes from a corporate mine in Montana, which now sends the coal to Asia via a British Columbia port but eventually hopes to ship coal through Cherry Point.
In a July interview with analysts, Marshall said the current low prices in international markets “leave little export margin, but the sales remain profitable overall.”
Hal Bernton: 206-464-2581 or email@example.com