Must-know: US thermal coal exports are falling

US thermal coal exports grew rapidly from 2010 to 2012. They fell marginally in 2013. Thermal coal exports account for ~40% of total coal exports and ~6% of total thermal coal produced in the US.

However, the importance of thermal coal exports increased because of the issues US coal producers (KOL)—including Peabody Energy (BTU), Arch Coal (ACI), and Alpha Natural Resources (ANR)—are facing at home. Latin American and Europe are major export destination for US thermal coal.

US thermal coal exports continued to fall from the peak seen in 2012. US thermal coal exports were 19.6 million tons in the first half of 2014—down from 26.9 million tons during same period in 2013. The drop was mainly driven by falling demand from Europe. US thermal coal producers exported 11.5 million tons of thermal coal to Europe during first nine months of 2014—compared to 15.5 million tons during the same period last year. Exports to Latin America are also falling because Columbian exports are increasing.

So far, the European recovery has been muted. The ECB’s (European Central Bank) efforts to put the region back on a growth track failed. Also, Europe’s growth engine, Germany (EWG), is also showing signs of weaknesses. As a result, coal consumption and imports by the EU (European Union) nations decreased this year.

Russia and Columbia are the top two coal exporters to Europe. Russia and Columbia’s supply is increasing. As a result, US exports to Europe were impacted negatively. Unless there’s a material recovery in the European economy or a major event disrupts supply from other competing countries, US thermal exports won’t see any traction.

Geopolitics is an event that could disrupt supply from Russia. This would benefit US thermal coal exporters. We’ll discuss this more in the next part of this series.