Baltimore coal terminals seeing rebound in U.S. exports

One hundred and fifty thousand tons of coal rumbled across a suspended conveyor belt over the CNX Marine Terminal in Baltimore and into the nine cavernous holds of the SwissMarine Certoux, a Bermuda-flagged bulk carrier bound for Kandla, India.

The scene has become familiar. Baltimore has shipped about a million tons of coal per month this year — a sharp increase from 2016 that mirrors a nationwide rebound in coal exports.

“Last year, this terminal did just shy of 9 million tons, and we’re right at that already this year,” general manager Jim Latham said. “The terminal’s on a very, very good pace. We ought to surpass our best annual mark ever. ... In the fourth quarter alone, we’re projected to do about 4 million tons out of this terminal.”

U.S. coal exports are on pace to finish 2017 up 19 percent from the previous year, the Energy Information Administration reported in July. The main reasons: foreign coal mine outages, supply chain problems and rising demand — in France and Ukraine, for example — that have left customers looking for new sources.

In an industry that’s been battered mostly by the rise of cheaper natural gas, the increase has been welcomed. The mines, rail and shipping lines, and port terminals — and the workers at every step of the supply line — all have benefited.

What’s not clear is how long it will last.

“We’ve had some really good years in coal,” said Rick Powers, director of sales and marketing for the Maryland Port Administration. “The last couple were not so good. We’re seeing good numbers this year.”

Last year was the worst in recent memory for the U.S. coal industry, said Rob Godby, director of the Center for Energy Economics and Public Policy at the University of Wyoming.

The 61 million short tons exported by the country in 2016 amounted to less than a quarter of its coal export capacity, according to the Energy Information Administration.

“Facilities in the Norfolk, Virginia, area alone have the capacity to export approximately 84 [million short tons] annually — more than the total amount of coal exported from all U.S. ports in 2016,” the agency reported

Coal exports returned to pre-Recession levels in 2010, but have declined each year since 2012, Godby said. This year’s increase looks outsized compared to a terrible 2016, he said.

“If your basis of comparison was last year, you’re not setting the bar very high,” he said. “If anything, they’re just catching up to where they used to be.”

One sign that the industry isn’t reading too much into this year’s jump?

“With coal exports running well below export capacity, no significant expansions of coal export facilities in the United States are currently under construction,” the Energy Information Administration reported.

The United States is a “swing producer” for coal customers around the world, Godby said.

“We kick in when there’s an issue somewhere else and there’s a need for coal,” he said. “If there’s a sudden boost of demand, we’ll come in and make up that difference.”

But when overseas coal is moving as normal, the U.S. market share is hampered by the sheer distance American coal must travel to reach markets in Europe and Asia.

Baltimore is the East Coast’s second largest coal exporter. The city’s two private coal port terminals — CNX Marine Terminals, owned by CONSOL Energy, and Curtis Bay Coal Piers, owned by CSX Transportation — together can ship out as much as 29 million short tons annually, according to the Energy Information Administration.

The coal arrives at CNX from mines in Pennsylvania, West Virginia and Ohio aboard 130-car trains, which are dumped two cars at a time at the coal pier adjacent to the Port of Baltimore’s Seagirt Marine Terminal. It is either stockpiled or loaded immediately onto waiting ships en route to customers in any of 23 different countries, Latham said.

A giant bulldozer slowly scaled a chalky black mountain visible from Interstate 95, grooming the coal stockpiles to a height of 65 feet to keep them tightly packed and wringing out the rainwater that leaves ridges in the piles, causing them to erode.

“That’s Miss Edna, the dozer operator,” Latham said. “She is a gem.”

CNX Marine Terminals has 41 employees in Baltimore — 14 salaried and 27 hourly. The increase in the terminal’s exports hasn’t forced CONSOL to scale up its workforce, Latham said, but employees are earning more overtime.

CSX doesn’t release projections by terminal, but it expects to export 30 million tons of coal from four U.S. ports, spokesman Rob Doolittle said. The company has seen a 40 percent increase in coal exports in the first half of the year.

CSX exports of metallurgical coal, used in making steel, have increased 28 percent from the first half of 2016, he said. Exports of thermal coal, for heating, are up 70 percent.

“Overall export coal volumes for CSX have increased as global supply levels and pricing conditions extended strong demand for U.S. coal exports, particularly in the metallurgical portfolio,” Doolittle said in a statement.

Globally, Godby said, increasing demand for coal in developing nations such as India has been offset by declines in the United States and other industrialized countries that are turning to alternatives such as natural gas and renewable energy.

Several analysts anticipate worldwide coal production to be flat through 2040, he said.

"This is a significant change from, say, five or six years ago, when coal was expected to be much stronger in the coming decades," Godby said.

Exports are a small percentage of the U.S. coal market, Godby said. Of the roughly 720 million tons produced domestically last year, only about 10 percent went to customers outside the country.

U.S. coal exporters can thank a confluence of factors for this year’s increase, Godby said.

A rise in demand for metallurgical coal doubled its market price and drove some of the jump, Godby said. Metallurgical coal comprises about five to 10 percent of total U.S. coal production, he said.

“Prices went through the roof because of supply issues in Southeast Asia,” he said. “Suddenly there was a market for that coal.”

Problems at nuclear power plants in France caused more than a dozen to be shut down, creating a new demand for imported thermal coal.

In eastern Ukraine, Russia-backed rebels have cut off the supply of thermal coal. President Donald J. Trump, who has vowed to save coal-mining jobs, announced a deal in July to send 700,000 tons of Pennsylvania coal to the country in a bid to loosen Russia’s grip on the energy supply.

That coal came through the CNX Marine Terminal in Baltimore, port officials said.

While the coal terminals are private, the coal exports qualify Baltimore as an energy transfer port, which has made the Maryland Port Administration eligible for $5.2 million in federal funding for 2016 and 2017.

The port administration plans to use the funding for dredging that allows the massive bulk carriers to call at the coal terminals, spokesman Richard Scher said.

Godby called the increase in coal exports “good news in an industry that has had mostly bad news recently.”

“My perspective — and I’m not trying to rain on anyone’s parade — is that a lot of different factors internationally have created this demand for U.S. coal, but a lot of those factors are probably temporary,” Godby said.

While environmental regulations have hurt the coal industry, he said, their impact is far less severe than hydraulic fracturing, the controversial process that opened up large reserves of domestic natural gas. Natural gas is currently cheaper than coal.

“If there was a war on coal,” Godby said, “it was declared in 2008 when the fracking boom started.”

Coal also faces emerging competition from renewable energy sources such as wind power, which have become more economical, Godby said.

In short, the bump in exports is driven by localized pockets of demand, he said, not long-term trends.

“We’re not talking about a sudden resurgence of coal production across the country,” Godby said. “What we’re talking about is a few mines and a few ports with larger contracts and new contracts. It makes a big difference to those ports and mines, but in the scheme of things it’s a relatively small bump in a large market.”

Latham isn’t convinced that renewables will overtake fossil fuels anytime soon. CONSOL has not released any 2018 export projections, but the Baltimore terminal director is encouraged by this year’s growth.

“We’re not seeing any signs right now that things are going to slow down,” Latham said. “And that’s a good thing.”

cmcampbell@baltsun.com

twitter.com/cmcampbell6

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