Over 40 years ago when I worked in operations for Norfolk & Western Railway (since merged with Norfolk Southern) in train operations, coal was literally everywhere, including in your eyes, ears, nose and throat. Now it seems that coal has gone global.
The U.S. has an abundance of coal, which until recently had been the fuel of choice. The natural gas revolution in the last decade has severely undermined use of coal in traditional steam coal markets. Although U.S. coal exports have doubled during this period, there is still plenty of production slack.
In the face of a drop in coal production, and in a nation that is seemingly buried in coal resources and capacity, it seems strange that U.S. coal imports are increasing. But with other parts of the world faced with oversupplies of coal, prices for imported coal are comparatively cheap. For example, Colombian coal reportedly has production costs of about $15 per ton compared to Appalachian coal’s $60 per ton. Colombian coal is being sold to Eastern U.S. power plants in the delivered price range of $75 to $82 a ton compared to $79 to $86 a ton for Appalachian coal.
Some of the import coal procurements seem odd. For example, a Portsmouth, N.H., utility purchased Russian coal and shipped it nearly 4,000 miles for delivery at the local harbor. The cost was reportedly less as delivered by bulk carrier with higher coal heat content than Appalachian coal and rail delivery.
Recent rail freight capacity bottlenecks will also likely have an effect on imported coal sourcing when there are competitive offshore supplies available. Major southern utilities that are currently receiving imported coal have reported that they plan to increase offshore procurements in the face of continued soft prices.
While imported coal does not provide much of a threat to domestic barge coal markets, the current conditions indicate how competitive the international and domestic coal markets are. Imported coal may in fact result in some additional Lower Mississippi River cargo for the barge industry.
If imported coal prices stay low, then imports through the Lower Miss are a distinct possibility that will reverse the traditional southbound flow of domestic coal exports with northbound barge imports of coal.