When it comes to coal, ship­ping more is the goal

Baltimore Sun Sunday - - FRONT PAGE - By Colin Campbell

ne hun­dred and fifty thou­sand tons of coal rum­bled across a sus­pended con­veyor belt over the CNX Ma­rine Ter­mi­nals 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,

Osup­ply 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 sec­ond­largest 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.”

KIM HAIRSTON/BAL­TI­MORE SUN PHO­TOS

A stacker/re­claimer op­er­ates at the CNX Ma­rine Ter­mi­nal in Bal­ti­more. The ma­chine can stack coal in piles or move it to a wait­ing ship by way of a con­veyor belt. Bal­ti­more is the East Coast’s sec­ond-largest coal ex­porter, and business has been up this year.

Jim Latham has seen business in coal ship­ping im­prove at CNX Ma­rine Ter­mi­nals. “We ought to sur­pass our best an­nual mark,” he says.

KIM HAIRSTON/BAL­TI­MORE SUN PHO­TOS

A bull­dozer op­er­a­tor moves coal at the CNX Ma­rine Ter­mi­nals. The equip­ment is used to groom the coal stock­piles to a height of 65 feet and to keep them tightly packed.

Coal moves on a con­veyor belt at CNX Ma­rine Ter­mi­nals as it is about to be loaded on the Swis­sMarine Cer­toux. The Ber­muda-flagged bulk car­rier will de­liver the coal to In­dia.

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