Great Britain, the country that used its vast coal stocks to pioneer industrial development in the 18th century, has become a major coal importer in recent years, its own industry moribund. With Newcastle-upon-Tyne once being the center of a rich English coal region, the phrase “hauling coals to Newcastle” was a cliché describing an absurd economic proposition.
Nowadays, however, coal arrives regularly at the Port of Tyne from suppliers in the Baltic and South America. American coal goes to other English ports at rising rates; figures from the Commerce Department show that in 2007, United States steam coal exports to the United Kingdom increased by 53 percent and coking coal, used in steel-making, by 20 percent, compared to the previous year.
The boom in coal exports is partially linked to a falling dollar, which makes American coal cheaper on world markets. But there are deeper, longer-term reasons for the world to turn to the United States, which has 27 percent of the world’s coal reserves, more than any country.
Asian Boom Burning Through Coal Stocks
As it continues a building spree for coal-fired power plants, China is consuming so much coal that its ability to export is diminishing rapidly; it is expected to become a net importer. Other exporters like South Africa, Indonesia and Vietnam are cutting back for a variety of reasons, including growing domestic needs and local power shortages. Recent flooding in Australia has cut exports, at least temporarily, while an earthquake closed a major mine in Germany.
Meanwhile India is building huge coal plants that will require growing imports, while Russia is using more and more coal to make natural gas available for export.
As a result the pattern of world shipments for coal used for metallurgical and energy purposes is shifting. South Africa and other exporting nations that used to export to Europe are turning to Asia, where coal prices are higher, leaving European markets open for American exports. American coal is making its way to England, Spain, Japan and other countries that traditionally looked elsewhere.
The increase expected this year will make the United States a major global exporter for the first time since the early 1990s. For years, low-cost producers in Australia, China and other countries grabbed the bulk of the international coal trade. But now the United States is becoming a low-cost producer, in part because the euro and other currencies have gained so much value in relation to the dollar.
US coal exports a hedge against domestic hostility to dirty fossil fuel
In the United States, plans to build new coal-fired plants are being shelved, and bankers are scrutinizing new projects because of uncertainties over future costs of carbon dioxide emissions. Both Democratic and Republican presidential candidates say they favor legislation to control global warming, which would presumably limit such emissions.
As the coal industry sees it, exports could be crucial if the American market starts to shrink. Coal executives are talking about upgrading mines, rail and port facilities to meet increasing world demand.
Just within the last couple of months, Peabody began sending coal from Wyoming to Europe, first by rail to the Mississippi River, then by vessel through the Gulf of Mexico. And for the first time in a decade, the company is shipping coal to Japan from the California coast.
“As U.S. coal demand is constrained because of increasing environmental regulation, coal production in the United States will increasingly go toward overseas buyers,” Chris Ruppel, an energy analyst at Execution, a brokerage and research firm, predicted.
The rise in coal prices has so far been invisible to most American consumers because price increases have yet to hit most utilities.
American Electric Power said it had contracted for more than 90 percent of its coal for 2008 before recent price increases. The company said it expects to spend 13 percent more for coal this year than last, after spending about 5 percent more in 2007 compared with 2006.
“We’re not going to see the spot market price in the customer’s bill today,” Mr. Zebula said. “But clearly the price of the good has gone up and will increase over time.”
Already, there are some signs of rising prices. Appalachian Power and Wheeling Power, both American Electric Power subsidiaries, on Feb. 29 filed papers seeking approval in West Virginia for a 17 percent increase in revenues, mainly to pay for costlier coal. If the request is approved, a residential customer using 1,000 kilowatt hours a month would see his bill increase from $64.55 to $73.94, starting in July.
Kenneth B. Medlock, an energy analyst at Rice University, predicted many more electricity consumers will begin to feel the coal price spike over the next year, particularly in states most dependent on coal, like Kentucky, Illinois and Ohio.
“Their power bill is going to go up, but it also will start to affect the prices of goods they buy at the grocery store,” he added.