“Projects pitched, for example, at Longview, Washington at the Port of Oakland, and for the Chuitna River near Anchorage are more pie in the sky than ever,” IEEFA director of finance Tom Sanzillo said.
“Proponents push them, nonetheless, because one way or another they bring taxpayer-funded subsidies to the increasingly desperate US coal industry.
“Coal producers are seeing domestic demand for coal-fired electricity generation falling, and so the industry is placing a huge if misguided bet on foreign markets.”
To illustrate his point, Sanzillo cited a recent UBS research note projecting coal’s domestic share of electricity generation dropping to 18% by 2030 from 38% today.
Deutsche Bank, meanwhile, said its modelling showed China was becoming a net coal exporter adding 100 million tons per annum to global markets by 2030 and reducing its import demand to zero.
Some analysts say the fact China consumes almost as much coal as the rest of the world means its export-import shift is going to create a significant, permanent reduction in global demand.
Goldman Sachs has also lowered its price outlook for global thermal coal over the next several years, as coal is in oversupply; while Citi sees continued coal-industry distress through 2016.
However, Sanzillo said Investment bankers were not the only ones “clued in” to coal’s distress, with the US Energy Information Administration also recently lowering its forecast for US coal exports to 73Mt next year, down from an estimated 76Mt this year.
In the face of rapidly declining 2015 export deliveries of US coal, “this trend speaks volumes and tracks a drastic falloff from the 125Mt exported in 2012, the peak year for US coal exports”, Sanzillo said.
“Driving the reality home comes news last week that Usibelli coal mine, Alaska’s only coal producer and the model that a Texas-backed company says it wants to follow in its development of a coal project on the Chuitna River, is closing its export operations through 2016.
“US coal industry fundamentals are falling apart, as seen in prices, production, contract orders and competition, and while day-trading and penny-stock news is dominated by coal-stock volatility, the industry’s fundamentals continue to sink as the third-quarter earnings season approaches.”
