Viewpoint: US steam coal exports shift to Europe
Europe may continue to dominate US thermal coal exports in 2023, as EU countries continue to block Russian coal and Moscow's drastic cuts to natural gas supply keep gas prices elevated.
But demand for high-sulfur coal may wane.
Europe passed Asia as the primary destination for US steam coal exports in August for the first time since November 2018. And it held that top spot the following two months, the latest US Commerce Department data show. By the end of October, US steam coal exports to Europe on a year-to-date basis had climbed to a four-year high of 10.4mn short tons (9.45mn metric tonnes), while volumes to Asia dropped by more than 6mn st to 13mn st.
The shift in US thermal coal exports in 2022 came as Europe continued to recovery from the Covid-19-induced downturn, a colder-than-normal winter and then Russia's February invasion of Ukraine. Higher natural gas prices also boosted coal-fired generation in Europe, while supply disruptions in other countries bolstered delivered coal prices, making the continent a more attractive destination for coal sellers.
At the same time, some other countries' appetite for US steam coal faltered, as prices rose and buyers in a number of those countries were able to take lower-priced Russian or Indonesian coal. Petroleum coke also held a competitive advantage over steam coal for cement makers.
Europe likely continued to be the top destination for US thermal coal in November and December. That could result in US volumes to Europe for all of 2022 being just shy of shipments to Asia.
For 2023 "all things unchanged, I think there will be good flow of US exports to Europe," one market participant said. He estimated it will be a mix of shipments that were put under contract in 2022 and new deals.
But the export picture is not entirely rosy. Prices have fallen from the records set in the middle of 2022, which could deter some US producers.
Also, while demand for low-sulfur coal could continue to be elevated in 2023, interest in US high-sulfur coal faces challenges in Europe. Generators on the continent historically have blended high-sulfur coal with Russian supply to bring sulfur levels down. While other countries serving European markets also have lower-sulfur coal, it tends to have a higher sulfur content than Russian supply, which has not been allowed to enter EU countries since 10 August. To keep sulfur content and emissions steady, generators that blend coal likely have decreased the amount of high-sulfur coal in the mix to 25pc from the typical 35pc as they ran out of Russian supply, one market participant estimated.
Low water levels also slowed coal shipments from terminals in Amsterdam-Rotterdam-Antwerp (ARA) and a relatively mild autumn and start to winter limited coal consumption. Now, "there is ample supply of high-sulfur coal in Europe," a utility buyer said.
In October, US exports out of New Orleans — which typically are mid- to high-sulfur Illinois basin coal — to Europe fell from year-earlier levels for the only the second time in 2022 and were the lowest since December 2021. Still, January-October shipments from the port district to Europe were at a four-year high of 5.7mn st.
Thermal coal exports out of Baltimore, Maryland, to Europe for the first 10 months of 2022 quadrupled to 2.22mn st, which is the most since at least 2012, as buyers in India reduced Northern Appalachian coal purchases.
If coal continues to be priced above petroleum coke, cement makers likely will continue to favor petroleum coke, further boosting competition to place Illinois basin and Northern Appalachian coal in Europe. Producers from both basins have announced plans to expand output next year, which would also put downward pressure on prices. But some of that increased output will go to domestic customers or could be scaled back if demand does not support supply increases.
Inventories of other types of coal in Europe also are elevated following buyers' moves to ramp up purchases of coal from other origins – including US low-sulfur coal - ahead of both the embargo on Russian and supply and the winter. On 18 December, inventories at the ARA hub's main ports totaled 6.2mn t, which was about 900,000t above the 2017-2021 average for mid-December.
"First quarter demand is going to be pretty gruesome because the reality is a lot of people have got a lot of stock at the moment," one market participant said. He still expects exports to Europe for 2023 as a whole to be flat with 2022 but noted demand likely will depend on how cold the winter is and how generators handle the lack of Russian natural gas imports.
At the same time, US supply of low-sulfur bituminous coal is somewhat limited and will depend on pricing. Producers this year extended the life of some Central Appalachian steam coal mines and washed high-volatile metallurgical coal to become thermal coal, as seaborne prices reached record highs. As European-delivered coal prices have fallen closer to $200/t cif ARA and lower, fewer offers of low-sulfur US coal are being made.
Producers remain committed to winding down more Central Appalachian thermal coal operations as soon as 2023. That could change if prices rise again, but US thermal coal exports likely to Europe next year may at best be flat with 2022.
Top European Destinations for US coal | st | |||
Country | Oct-22 | Oct-21 | ytd 2022 | ytd 2021 |
Netherlands | 621,251 | 580,073 | 4,954,309 | 3,304,753 |
Germany | 393,772 | 0 | 2,057,712 | 735,796 |
Poland | 69,083 | 0 | 707,248 | 177,778 |
Spain | 349 | 22,258 | 234,787 | 93,538 |
Croatia | 0 | 0 | 203,200 | 0 |
UK | 167,349 | 105,934 | 1,429,140 | 401,045 |
Romania | 0 | 0 | 160,601 | 42,439 |
Denmark | 0 | 0 | 110,839 | 62,595 |
Belgium | 55,759 | 0 | 103,214 | 22,094 |
France | 27,550 | 70,426 | 86,272 | |
US Commerce Department |
US exports to Europe by District | st | |
Port District | Jan-Oct 2022 | year-over-year change |
New Orleans | 5,694,089 | 2,187,852 |
Baltimore | 2,215,839 | 1,719,744 |
Norfolk | 1,322,010 | 764,487 |
Mobile | 980,455 | 636,956 |
San Francisco | 64,281 | 64,281 |
Houston | 68,095 | 7,441 |
US Commerce Department |
Related news posts
Australian new environment agency to speed up approvals
Australian new environment agency to speed up approvals
Sydney, 16 April (Argus) — The Australian federal government announced today it will introduce new legislation in the coming weeks to implement the second stage of its Nature Positive Plan, which includes setting up a national environment protection agency to speed up approval decisions. The planned Environment Protection Australia (EPA) will initially operate within the Department of Climate Change, Energy, Environment and Water until it transitions to become an independent statutory agency, with "strong new powers and penalties" to better enforce federal laws, the government said on 16 April. The EPA chief will be an independent statutory appointment, similar to the Australian federal police commissioner, so that "no government can interfere" with the new agency's enforcement work. The agency will be able to audit businesses to ensure they are compliant with environment approval conditions and issue environment protection orders to anyone breaking the law. Penalties will be increased, with courts able to impose fines of up to A$780mn ($504mn) or jail terms for up to seven years in cases of extremely serious intentional breaches of federal environment law. EPA will also be tasked with speeding up development decisions, including project assessments in areas such as renewable energy and critical minerals. Almost A$100mn will be allocated to optimise the approval processes, with its budget directed to support staff to assess project proposals and help businesses comply with the law. A new independent body Environment Information Australia (EIA) will also be created to provide environmental data to the government and the public through a public website. EIA will need to develop an online database giving businesses quicker access to data and helping EPA to make faster decisions. It will also need to publish state of environment reports every two years. The government said that an audit ordered by environment minister Tanya Plibersek last year found that around one in seven developments could be in breach of their offset conditions, when a business had not properly compensated for the impact a development was having on the environment, highlighting "the need to urgently strengthen enforcement". The planned new legislation is part of the federal government's reform of Australia's environmental laws including the Environment Protection and Biodiversity Conservation Act. Resource project decisions are currently made by the environment minister, with the move to an independent agency will removing any perception of political interference in such decisions, the government said when it first announced the reforms in late 2022. The first stage of the reform was completed late last year with new laws passed to create the Nature Repair Market, with further stages expected to be implemented in the future, the government said. Tight timing Resources industry body the Chamber of Minerals and Energy of Western Australia (CMEWA) welcomed the announcement that the federal government will take a "staged approach" to the implementation of the reforms but noted the timing of EPA's implementation was "tight". "We continue to hold reservations about the proposed decision-making model and will continue to advocate for a model that balances ecologically sustainable development considerations and includes the [environment] minister as the decision maker," CMEWA chief executive Rebecca Tomkinson said. The Minerals Council of Australia (MCA) said that it had been advocating for the creation of EIA, whose future collated data "will provide greater certainty and reduced costs for both government and project proponents", which "may shave years off project development". But it was cautious about potential "unintended consequences" stemming from more bureaucracy. "Australia has one of the most comprehensive environmental approvals processes in the world and the MCA has been clear about the significant risks of duplicative, complex and uncertain approvals processes pose to the minerals sector, the broader economy and the environment if we do not get this right," it warned. By Juan Weik Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Engie to switch Chile coal plant to energy storage
Engie to switch Chile coal plant to energy storage
Santiago, 11 April (Argus) — French utility Engie is investing approximately $180mn to convert its former Tocopilla coal plant in northern Chile's Antofagasta region into a 116MW standalone battery energy storage system (BESS). The BESS Tocopilla plant will be able to store 660MWh captured from significant solar and wind curtailment in the north, which has risen by almost 250pc to 1,699GWh in the year-to-date compared to a year ago. The project involves installing 240 lithium ion-based containers on the former coal plant's site and making use of infrastructure synergies such as its transmission assets. Construction is scheduled to start in June. BESS Tocopilla will have an average annual generation capacity of 211GWh, the equivalent of supplying almost 90,000 Chilean homes with power, avoiding the emission of 51,231 t/yr of carbon dioxide equivalent, said Engie. Engie disconnected the 268MW Tocopilla coal and fuel oil plant in September 2022. Its 394MW combined-cycle Tocopilla gas plant, part of the same complex, continues to operate. Engie is the country's fourth-largest generator with an installed capacity of almost 2.5GW. BESS Tocopilla is its fourth industrial-scale storage project in Chile, one of which is already in operation and another two under construction. By Emily Russell Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
April-May maintenance to close Australian coal systems
April-May maintenance to close Australian coal systems
Sydney, 10 April (Argus) — Australian rail firm Aurizon will close the 50mn t/yr Blackwater coal system in Queensland over 13-17 April for maintenance, with further closures scheduled for May. The firm, which operates the Central Queensland Coal Network (CQCN), confirmed that it plans to close its 60mn t/yr Goonyella system during 1-3 May, its 15mn t/yr Moura system for 14-16 May and Blackwater again during 27-29 May, as part of an annual planned maintenance programme. The only CQCN system not included in the maintenance programme is the 15mn t/yr Newlands system. Blackwater and Moura deliver coal to the port of Gladstone from the southern end of the Bowen basin. Goonyella delivers to the adjacent ports of Dalrymple Bay Coal Terminal, which is a multi-user facility, and BHP-operated Hay Point from the central Bowen basin. Newlands delivers to Abbot Point from the northern Bowen basin. Aurizon, Pacific National, BHP and some smaller coal haulage operators use the CQCN. Aurizon is targeting a 5pc year-on-year growth in coal haulage by its fleet across the CQCN and New South Wales/southern Queensland in the 2023-24 fiscal year to 30 June. This implies a target of 194mn t for 2023-24. It hauled 94mn t during July-December, leaving it a target of 100mn t for January-June. By Jo Clarke Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Panama Canal to restrict May transits on work
Panama Canal to restrict May transits on work
New York, 9 April (Argus) — Maintenance at the Panama Canal for the Panamax locks, responsible for around 70pc of all ship crossings at the waterway, will cut the daily number of vessel transits through these locks for nine days in mid-May, the Panama Canal Authority (ACP) said today. The ACP said it will reduce Panamax lock transits from 7 May to 14 May by three to a total of 17. The cuts entail two fewer "super" category slots for vessels like medium range (MR) tankers and Supramax bulkers and one fewer "regular" category slot for smaller vessels. An additional day of downtime "allowing 24 hours for unforeseeable maintenance delays" will put the projected end-date for maintenance and the return to 20 total Panamax lock transits on 16 May, according to the ACP, constituting a nine-day reduced-transit period that should drop total transits in the period by around 27 vessels. The potential for heightened competition amid a backlog of vessels vying to transit during this time could be mitigated by assigning "additional transits per day for each vessel category" based on the canal's "daily water consumption quota", according to the ACP. "These additional slots may be assigned to booked vessels that have already arrived at canal waters," the ACP said. "This measure is a temporary service subject to operational assessment, open to all vessel types based on the arrival date." The maintenance will primarily target the west lane of the Gatun locks, where ships enter the Panama Canal from the Atlantic basin, while the ACP noted that the east lane of the Miraflores locks on the Pacific side will undergo a simultaneous maintenance period from 11-12 May. Panamax lock transit auction prices hit low The average cost for ship operators to win an auction to transit the Panama Canal via the Panamax locks hit its lowest level Monday since Argus began the assessment in January on lower demand, particularly for dry bulkers utilizing alternative routings, and an uptick in auction slots in early March . "Since the peak period last year, auction prices have leveled off. They are generally near normal levels today," said the ACP. The rate for a Panamax lock auction dropped by $14,173 to $94,314, the lowest average price to transit since 26 January and representing a drop of $450,936 from the high hit on 5 February on a jump in demand ahead of lunar new year holidays across Asia-Pacific. Of the smaller dry bulkers that can fit in the Panamax locks, only 34 Handysize, 38 Supramax, and 31 Ultramax bulkers transited the Panama Canal in March compared with the 92 Handysize, 66 Supramax, and 88 Ultramax bulkers that transited in March 2023, the lowest number of transits in March for these segments through 2017, according to Kpler data. Dry bulk Panama Canal transits down, tanker transits stabilizing The share of dry bulkers utilizing the Panamax locks at the Panama Canal was at 15.2pc of total transits in February, down from the 25.5pc share that dry bulkers held in September 2023, according to ACP data, before the ACP instituted daily vessel restrictions and the current prebooking/auction slot system supplanted the previous, first-come, first-serve waiting system in late October 2023. Meanwhile, 149 MR tankers transited in March, down from the 169 that transited in the same period the year prior but up from the 107 MRs that crossed the canal in February. MR transits have risen every year in March, according to Kpler, as west coast South America diesel demand jumps on the resurgence of refinery utilization in the US Gulf coast after the first quarter turnaround season draws to a close. Crude, product, and chemical tanker transits rose by 1.7 percentage points to 30.3pc, making up the plurality of all Panamax lock transits collectively in February from September 2023, according to ACP data. The uptick in available Panamax lock auctions in early March has likely offset the steady demand for these vessels and contributed to the downward pressure on auction prices, while the reduced transits during the upcoming nine days of maintenance could reverse this trend in the short term. ACP expects transit restrictions to lift by 2025 In the long term, the Panama Canal expects a return to normalcy within the next two years, beginning with the start of the rainy season in the coming weeks. "Current forecasts indicate that steady rainfall will arrive in late April and continue for a few months," the ACP said today. "If this remains the case, the canal plans to gradually ease transit restrictions, allowing conditions to fully normalize by 2025." By Ross Griffith Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more