Tag Archives: coal industry China

Beautiful Coal and Other Maladies

President Trump hasn’t been able to bring back “beautiful, clean coal” as he promised four years ago. As mines and power plants continue to close, the question many are asking in the diminishing American coal industry is—what now?

The use of coal to generate electricity in the U.S. is expected to fall more than a third during Mr. Trump’s first term, data from the U.S. Energy Information Administration show, as a glut of cheap natural gas unlocked due to fracking and increasingly competitive wind and solar sources gained market share. More than half of that drop happened before the new coronavirus outbreak. That compares with a decline of about 35% in coal consumed for power generation during Mr. Obama’s eight years in office.

In 2019, the U.S. consumed more renewable energy than coal for the first time since the 1880s, federal data show…“Coal isn’t coming back. You can’t legislate it,” said Karla Kimrey , previously a vice president at Wyoming-based coal producer Cloud Peak Energy Inc., which filed for bankruptcy protection last year. Domestic demand has continued to drop as utilities retire coal power plants and turn to cheap natural gas and renewables to make electricity, trends that have only accelerated as economies have slowed due to the pandemic. With less demand for power, many utilities have cut back on coal generation first, as it is generally more expensive

Meanwhile the rise of “ESG” or environmental, social and governance investing is constricting the industry’s ability to obtain capital, current and former executives say.  As major investors such as JPMorgan Chase & Co. and BlackRock Inc., the world’s largest asset manager, turn away from coal over concerns about climate change, coal companies are struggling to secure the insurance they need to operate. That hurts not only companies that mine the thermal coal used to generate electricity, but also those that mine metallurgical coal to make steel.

Excerpts from Rebecca Elliott and Jonathan Randles, Trump’s Promise to Revive Coal Thwarted by Falling Demand, Cheaper Alternatives, WSJ, Sept. 17, 2020

Debt and Coal: China-Mongolia friendship

Mongolia recently reached a new deal to sell coal to China, helping it boost its faltering economy and start repaying billions of dollars it owes Wall Street lenders.  Under the landmark agreement completed late 2016, Mongolia’s state-owned mining company will sell coal to China at roughly double the previously agreed-upon rate.  The deal follows a devastating four-year period when Mongolian miners exported coal to China at deeply-discounted prices, sometimes for as little as 11% of the global benchmark price, undercutting Mongolia’s economic growth. Mongolia agreed to those punitive terms to get the loan from China and has been struggling to repay it.

The new export agreement will help Mongolia pay its mounting debt, including bonds held by BlackRock Inc., Fidelity Investments, UBS Global Asset Management and other global investors that bought the debt for its double-digit yields, according to bond investors.

But the export deal has a downside for Mongolia: It effectively transfers much coal production from China, which is bent on cleaning up its environment, to its poorer neighbor…  Trucks carrying coal are backed up for nearly 40 miles at Mongolia’s southern border with China, in what some analysts call the world’s largest traffic jam…Yet Mongolia seems willing to make that trade-off, with coal prices soaring since China has begun cutting production, analysts say. Market prices for the type of coal produced in Mongolia, which is used in steel- and iron-making operations, skyrocketed 200% in 2016 to $225 a ton.

Mongolia is also in talks with some Asian firms to develop its Tavan Tolgoi coal reserves, analysts say. The Gobi desert site is one of the world’s largest untapped coal mines, with more than six billion tons of coal deposits.

Excerpts from the New China-Mongolia Mining Deal: Economic Windfall or Environmental Threat?, Wall Street Journal, Jan. 21, 2017

Boycotting Coal

Chinese coal  consumption dipped by 1.6% in 2014, despite economic growth of 7.3%. The country’s voracious appetite for steel is peaking, damping demand for coking coal. Worries about pollution mean that demand for thermal coal, as used in power stations, is slackening too. Water conservation is another concern for policymakers—on current trends coal could account for a quarter of China’s water use by 2020 and coal reserves are mainly in the most parched regions. Its coal-fired plants are running at only 54% of capacity, a 35-year low. In Beijing two big coal-fired plants closed this week; the capital’s last one will shut down next year.

Another prop to demand has been power generation in rich countries. But in America coal now struggles to compete with natural gas, which has fallen by 80% in price since 2008. Domestic coal use there peaked in 2007. European consumption soared after Germany’s hasty decision to close its nuclear-power plants. But gas and renewables are eating into that.

Coalswarm, an environmental think-tank, says in a new report that two-thirds of coal-fired power plants proposed worldwide since 2010 have been stalled or cancelled…. Overall, Europe and America have already cut coal-fired generation capacity by over a fifth in a decade. The output of American coal mines dropped to 1993 levels in 2013.

Political pressure is growing against the most carbon-intensive fossil fuel. Coal provides 40% of the world’s electricity. But of 1,617GW of global capacity, 75% is of the dirtiest kind…. The chimneys of all but the most modern coal plants also emit plenty of other nasties. Mercury emissions stunt young brains. Sulphur and nitrous oxides scald lungs. Overall, coal kills around 800,000 people a year, most of them poor. In China it is responsible for up to a sixth of the particulates most dangerous for human health.

In America the coal and electric-utility industries are fighting the Environmental Protection Agency’s attempts to curb emissions of CO2, mercury and other toxins contained in coal. On March 25th, 2015 the Supreme Court heard arguments by some state governments, backed by the miners and utilities, that the agency has failed duly to consider the cost of its measures against mercury (see article).

Campaigners reckon 80% of the world’s coal reserves must stay in the ground if the planet is to stand a chance of keeping global warming under 2ºC by 2050. A divestment movement akin to the apartheid-era campaign to boycott South Africa is under way in many universities. Stanford may dump its coal investments and Oxford University is under pressure to do likewise. The World Bank no longer invests in coal-fired plants. Last year Norway’s sovereign-wealth fund dumped its holdings in more than 50 coal companies worldwide. South Korea recently introduced a carbon cap-and-trade scheme which punishes coal….

Furthermore, in some emerging markets, India especially, demand for coal is set to continue rising—so overall global demand may not peak until at least the 2030s. This week India’s government predicted a 19% rise in the country’s coal imports in this fiscal year. But thereafter the plan is to bring in private contractors to develop India’s untapped coalfields, and then to phase out all thermal-coal imports. If so, that will be grim news for the Indonesian, Australian and South African mining firms that are supplying India at the moment.

Even though some other developing nations’ coal imports will grow in future, coal companies are having to face up to a crisis now. Some are cutting costs and getting ready for a wave of consolidation. Others are litigating and lobbying against change.

Excerpts from Coal Mining: In the Depths, Economist, Mar. 28, 2015, at 65