By Haley Zaremba
June 5, 2018 - China may soon be buying a lot more coal from the United States as part of a larger plan to narrow its trade deficit with Washington, according to reporting by Bloomberg. The coal would largely be sourced from West Virginia in what would be a major boon for the state’s ailing economy.
Last month China pledged to increase spending on U.S. energy and agricultural exports to begin reducing its merchandise trade deficit of $375 billion, in the interest of de-escalating the warning signs of a trade war of massive proportions. If coal makes up a significant portion of these purchases, it will be a big, unanticipated turnaround for West Virginia.
The state was a major supporter of U.S. President Donald Trump in the 2016 election thanks to lofty campaign trail promises to revive the dying domestic coal industry, particularly in Appalachia. However, it had looked like those promises would not amount to much despite so much MAGA rhetoric in West Virginia. Now, ironically, it looks as if China, of all places, just might be the saving grace for U.S. coal.
For an added level of irony, this also comes at the same moment that China is trying to decrease its dependence on coal. Notably, the notoriously smoggy Hebei province is aggressively cutting down on coal production and consumption, with plans to phase out 12.17 million tons of coal capacity spread across 22 mines this year.
Despite its best efforts, however, the nation still extracts, burns, and imports more coal than any other country on earth, and experts say that those numbers are going to keep rising. In fact, recent prices have jumped and the country is reportedly worried about keeping up with its own huge domestic demand.
According to numbers from BMI Research, Chinese consumption of thermal coal will increase from 3.4-billion tonnes in 2018 to 3.5-billion tonnes by 2027. While the net numbers will rise, this actually does project a slowing of China’s ever-increasing consumption rates, in accordance with the country’s efforts to move away from coal and towards cleaner energy sources.
Last year China imported 271 million metric tons of coal from foreign countries, and this year a more significant portion of that may be coming from Appalachia. Last year U.S. imports to China were just a sliver of their imports at a mere 3.2 million tons, compared to 108.9 million tons from Indonesia and 79.9 million tons from Australia.
While the U.S. coal exports have skyrocketed in the last year, ballooning by 61 percent. 32.8 million tons sent to Asia alone in 2017, the vast majority of which went to India. The total value of U.S. coal purchased by China in 2017 was approximately just $395 million, based on an average price of $122 per ton. Almost all of this--around 90 percent--was metallurgical coal, which is used to create high-grade coke, an essential component in the production of steel.
Interestingly, Chinese consumption of coking coal is actually projected to decrease in the coming years, from 652-million tonnes in 2018 to 647-million tonnes by 2027. What does this mean for the future of U.S. coal? It’s hard to say. If China does indeed step up its U.S. coal imports in the next year, West Virginia will be entirely grateful for the much-needed boost, but how short-term of a boost are we talking about? Enough to keep the state’s economy afloat until coal inevitably runs out in West Virginia’s depleting mines? And even if the answer is yes, then what?
Coal has a troubled future regardless of any foreign aid or Trump-era cutbacks on environmental regulations. It’s a finite resource, and West Virginia, once the nation’s powerhouse, has long been overtaken by Wyoming in terms of coal production. And regardless of deficit and increased imports, the majority of China’s coal is now and will always be made in China.
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