Australia seeks clarity from China on coal import curbs

: Coal
20/10/13

The Australian government has approached China seeking more clarity over potential disruption to its coal shipments, after many large importers were told by the government to stop buying Australian coal.

Coal trade between the two countries has been dragged into political disputes on more than one occasion this year, after Canberra's calls for an independent investigation into the origins of the Covid-19 outbreak drew a strong reaction from Beijing.

But Chinese bids have notably dried up in recent days on buyer concerns over whether Australian coal would be able to clear customs, threatening the biggest impact on trade so far.

Canberra is still unsure whether the halt to buying is related to the China's quota system that limits imports of Australia coal, or whether it is something new linked to trade tensions between the two nations. Australian trade minister Simon Birmingham has been unable to secure a meeting with his counterpart in Beijing, despite seeking one on several occasions this year.

Australian coal producers are also looking for more clarity, with few willing to comment on whether Chinese customers have cancelled shipments or cut buying. Most Australian coal mining firms are struggling to make a profit, although a rebound in prices over the past month has offered some relief for exporters of higher-grade coal.

Coal exports to China have made up proportionally more sales of Australian coal in 2020 than in previous years, as other key customers — such as Japan, South Korea and India — struggle to emerge from Covid-19 lockdowns.

The Minerals Council of Australia, the main industry body, downplayed the threat from a halt to sales to China. "The trade with China changes through the year based on a range of factors, including quotas. Australia will continue to see demand for its high quality of coal and the medium term outlook remains positive," the MCA's chief executive Tania Constable said.

Australia sold A$9.7bn ($7bn) of metallurgical coal and A$3.97bn of thermal coal to China in 2019, accounting for 24pc and 18pc respectively of the total value of these exports.

China's thermal coal imports from Australia totalled 45.77mn t last year, according to data from China's general administration of customs (GAC).

Imports were 38.65mn t in January-August this year, up by 14pc from the same period in 2019. But arrivals have slumped in recent months. July and August intakes registered year-on-year declines of 34pc and 55pc to hit 4.09mn t and 2.97mn t, respectively.

Coal trade is much smaller than China's A$79bn of iron ore purchases from Australia in 2019, which made up 82pc of total sales, but is significant enough to make Canberra pay attention. Coal is a politically charged subject in Australia, given the industry provides employment in key marginal seats in Queensland, where a state election will be held on 31 October.

China's customs authorities are stepping up their supervision of Australian coal imports, a GAC spokesman said today.

Questioned further by reporters about China's attitude to Australian coal, the spokesman emphasised the volume of Australian-China trade that he said totalled almost 860bn yuan (A$177bn or S128bn) in January-September.

By Jo Clarke

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25/01/02

Viewpoint: US utilities worry over railcar supply

Washington, 2 January (Argus) — US utilities are concerned that they may not have enough railcars to haul coal in the future as multiple power plants are seeking to remain in operation longer than expected. Power demand is forecast to rise in the coming years because of planned data centers in multiple parts of the country. Many data centers are expected to open before new generation, including natural gas, wind and solar-power units, go into service. A number of utilities want to avert the temporary power shortage by extending the life of coal-fired power plants beyond planned retirement dates. In response, demand is "poised to shift to a slight growth in the need for coal cars", according to railcar expert Richard Kloster, president of Integrity Rail Partners. Longer power plant lives as well as expectations of increased metallurgical coal exports are likely to provide demand for equipment. But the supply of railcars for coal has been slowly shrinking. No new railcars for the coal industry — primarily gondolas or open-top hoppers — have been built in nearly a decade. Utilities and leasing companies have had little interest in ordering new railcars for a shrinking sector. Many existing cars have also been scrapped, particularly during periods of low coal demand and high scrap prices during the last few years. There also are thousands of coal railcars in storage, but those do not really count towards demand, Kloster said. The cost of pulling those cars out of storage and making them service-ready is not necessarily cost effective, he said. About 21pc of North American coal cars were in storage at the beginning of August, up from 15pc in November 2022, according to Association of American Railroads data. In comparison, about 35pc of the coal car fleet was in storage at the start of July 2020, near the height of the Covid-19 pandemic. Possibilities of new construction There is a chance that "in the next 10 years, there will be coal cars built again", because many coal cars in the fleet are nearing 50 years of age, Kloster said. The retirement of many cars means that equipment must be pulled from storage or new units built, driving potential construction. Under Association of American Railroads (AAR) rules, railcars built after June 1974 can only be interchanged with other railroads for 50 years. After that, those cars are generally limited to operating on only one carrier. Some of those older cars may be retired early if they need repairs. Maintenance expenses could cause car owners to take units out of service. Utilities strategize Some utilities are already implementing plans to secure railcars, but others think taking additional steps will be unnecessary, according to railcar expert Darell Luther, chief executive of rail transportation firm Tealinc. The differing views are tied in part to whether utilities are regulated by states or merchant-owned, Luther said. Public utilities need to prove to regulators they can meet generating needs, including having enough coal and railcars. Privately owned operators have more flexibility in terms of contracting for coal and railcars. Several utility rail managers told Argus they do not see the need to take extra steps to secure railcars, confident that they already have plenty or can lease whatever they need in the future. But other utilities said they have taken steps to ensure they have coal cars in the future. Some utilities have purchased single or multiple cars as other generators sell them off. Others are increasingly leasing cars, with one utility saying that having more cars than needed is a cheap way of ensuring future supply. By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Viewpoint: US coal supply may tighten

24/12/31

Viewpoint: US coal supply may tighten

Houston, 31 December (Argus) — More US coal production cuts may be on the horizon, setting up thermal coal supply to potentially be lower than demand starting in late 2025. US coal producers have been scaling back mining operations since at least mid-2023 in response to lackluster demand. Market participants are continuing to contend with elevated power plant inventories following relatively mild winters and more competitive natural gas prices. Some producers are signaling more production cuts are coming in the next few months. As a result, the US Energy Information Administration (EIA) recently forecast the country's coal output in 2025 would fall by 7.2pc from this year to 472.3mn short tons (428.5mn metric tonnes), the lowest level in agency data going back to 1949. But US coal-fired generation and coal consumption is expected to grow modestly next year, to 643.7bn kWh and 409.4mn st, respectively, from 641.6bn kWh and 406mn st in 2024, because of greater electricity and industrial demand. Coal consumption for the electric power sector alone is expected to rise to 371.5mn st from an estimated 369.4mn st in 2024, EIA data show. Generators are expected to draw from their existing coal inventories for the majority of the year to meet the slightly higher electricity demand, potentially bringing power plant stockpiles down to more normal levels. Coal producers also are expected to have less inventory at mines and loadout facilities as volumes that had been deferred to 2025 are delivered. If the inventory withdrawals and expected slight increase in domestic consumption are coupled with higher export market prices and demand, "there could be an impetus for a slight ramp-up in domestic production, but currently, that prospect does not appear to be visibly on the horizon", EIA chief economist Jonathan Church said. For example, Argus assessments for calendar year 2025 API 2 coal swaps averaged $112.85/t from 1-24 December, compared with $104.19/t for all of December last year. The response from coal producers to any improvement in demand could be uneven, which could constrict competition and boost prices. While larger producers with longwall mining equipment, primarily in northern Appalachia and the Illinois basin, can somewhat efficiently resume or increase production, other companies may struggle to ramp up operations. Producers also may not have the financial support to increase coal output. A number of market participants expect smaller producers with higher-cost operations to be forced out of business as major banks continue to pull back on lending money to coal mining companies. In the nearer term, recent or planned coal mine closures could further limit supply. Alliance Resource Partners said in November that it intends to retire its central Appalachian coal-producing MC Mining complex in Kentucky, and the company has already cut operations to two of its four production units. Earlier in 2024, American Consolidated Natural Resources closed its Pride Mine in western Kentucky and Hallador Energy idled two small Indiana mines in February. Other producers have scaled back operations but kept mines open. Coal miners worked an average 45.5 hours/wk in October when not adjusted for seasonal factors, preliminary figures from the US Labor Department show. A year earlier, coal miners averaged 48.3 hours/wk. Producers also have to contend with an uncertain outlook beyond 2025, including an expected shift in environmental policies under president-elect Donald Trump, how new data centers will affect electricity demand, and timelines for installing new generation and transmission upgrades. Alliant Energy, Vistra Energy, Duke Energy and Louisville Gas & Electric and Kentucky Utilities are among utilities that recently announced plans to potentially delay retiring coal-fired generating units or plans to remodel coal units to co-fired natural gas and coal to try to meet load growth projections for the next few years. This could keep coal-fired generation and demand at least somewhat stable, but it may not provid long-term support. "To have increased coal demand, you would have to have load growth outpacing new supply," said Robert Godby, associate professor in the economics department at the University of Wyoming. He and others expect new renewable generation and transmission projects to eventually accommodate projected electricity demand growth. Increased load growth will be "at best just a reprieve from the ongoing downward trend in coal production and coal demand", Godby said. As such, producers may continue to try to limit output in 2025, which could partially raise domestic prices from current levels that straddle the line of profitability for many coal mining companies. But the increases will likely be modest as alternative energy sources are expected to continue to suppress demand for coal generation. By Anna Harmon Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US Supreme Court tees up more energy cases

24/12/31

Viewpoint: US Supreme Court tees up more energy cases

Washington, 31 December (Argus) — The US Supreme Court is on track for another term that could significantly affect the energy sector, with rulings anticipated in the new year that could narrow environmental reviews and challenge California's authority to set its own tailpipe standards. The Supreme Court earlier this month held arguments in Seven County Infrastructure Coalition v Eagle County, Colorado , a case in which the justices are being asked to decide whether federal rail regulators adequately studied the environmental effects of a proposed 88-mile railway that would transport 80,000 b/d of crude. A lower court last year found the review, prepared under the National Environmental Policy Act (NEPA), should have analyzed how building the project would affect drilling and refining. Business groups want the Supreme Court to issue an expansive ruling that would limit NEPA reviews only to "proximate" effects, such as how rail traffic could affect nearby wildlife, rather than reviewing distance effects. The court recently agreed to hear a separate case that could restrict California's unique authority under the Clean Air Act to issue its own greenhouse gas regulations for newly sold cars and pickup trucks that are more stringent than federal standards. Oil refiners and biofuel producers in that case, Diamond Alternative Energy v EPA , say they should have "standing" to advance a lawsuit challenging those standards — even though they could now show prevailing in the case would change fuel demand — based on the alleged "coercive and predictable effects of regulation on third parties". These two cases, likely to be decided by the end of June, follow on the heels of the court's blockbuster decision in June overturning the decades-old "Chevron deference", a foundation for administration law that had given federal agencies greater flexibility when writing regulations. Last term, the court also limited agency enforcement powers and halted a rule targeting cross-state air pollution sources. This term's cases are unlikely to have as far-reaching consequences for the energy sector as overturning Chevron. But industry officials hope the two pending cases will provide clarity on issues that have been problematic for developers, including the scope of federal environmental reviews and the ability of industry to win legal "standing" to bring lawsuits. Two other cases could have significant effects for the oil sector, if the court agrees to consider them at a conference set for 10 January. Utah has a pending complaint before the court designed to force the US to dispose of 18.5mn acres of "unappropriated" federal land in the state, including oil-producing acreage. Utah argues that indefinitely retaining the land — which covers about a third of Utah — is unconstitutional. In another pending case, Sunoco and other oil companies have asked for a ruling that could halt a series of lawsuits filed against them in state courts for alleged damages from greenhouse gas emissions. President-elect Donald Trump's re-election could create complications for cases pending before the Supreme Court, if the incoming administration adopts new legal positions. Trump plans to nominate John Sauer, who successfully represented Trump in his presidential immunity case, as his solicitor general before the Supreme Court. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: US gas market poised for more volatility

24/12/26

Viewpoint: US gas market poised for more volatility

New York, 26 December (Argus) — US natural gas markets may be subjected to more dramatic price swings in 2025 as growing LNG exports and increasingly price-sensitive producers place greater pressure on the US' stagnant gas storage capacity. Those price swings could pose challenges for consumers without ample access to gas supplies, as well as producers interested in keeping some output unhedged to capture potentially higher prices without taking on excessive financial risk. But volatility may also present opportunities for traders looking to exploit unstable price spreads, and for producers that can adapt their operations to fit a more unpredictable pricing environment. Calm before the storm High storage levels and low spot prices this year — averaging $2.11/mmBtu through November this year at the US benchmark Henry Hub — triggered by an unusually warm 2023-24 winter, may have obscured some of the structural factors pushing the US gas market into a more volatile future. But those structural factors remain and loom increasingly large for prices. The US has moved from a roughly 60 Bcf/d (1.7bn m³/d) market eight years ago to a more than 100 Bcf/d market today, "and we haven't grown our storage capacity at all", Rich Brockmeyer, head of North American gas and power at commodity trading house Gunvor, said earlier this year. As supply and demand for US gas grow, the country's roughly 4.7-Tcf storage capacity becomes ever less effective in stemming demand shocks, such as extreme winter weather events, which can more rapidly draw down inventories than in years past. Additionally, a growing share of US gas is being consumed by LNG export terminals being built and expanded on the US Gulf coast. When those facilities encounter unexpected problems and cease operations — as has happened numerous times at the 2 Bcf/d Freeport LNG terminal in Texas in recent years — volumes that were previously being liquefied and sent overseas were instead backed up into the domestic market, crushing prices. More LNG exports may mean more opportunities for such supply shocks. US LNG exports are expected to increase by 15pc to almost 14 Bcf/d in 2025 as operations begin at Venture Global's planned 27.2mn t/yr Plaquemines facility in Louisiana and Cheniere's 11.5mn t/yr Corpus Christi, Texas, stage 3 expansion, US Energy Information Administration data show. Spot price volatility will be most acutely felt in regions like New England that lack underground gas storage. "In areas like the Gulf coast, where you have a lot of storage, it won't be a problem," Alan Armstrong, chief executive of Williams, the largest US gas pipeline company, told Argus in an interview. Producers' trade-off Volatile gas markets are a mixed bag for producers, many of whom profit from volatility while also struggling to plan and budget based on uncertain revenues for unhedged volumes. Though insufficient gas storage deprives the market of stability, "from the standpoint of a marketing and trading guy that's trying to manage my gas supply to customers and my trading book, I love volatility",said Dennis Price, vice president of marketing and trading at Expand Energy, the largest US gas producer by volume. BP chief financial officer Sinead Gorman in November 2023 specifically named Freeport LNG's eight-month-long shutdown in 2022-23 from a fire as a driver of volatility in the global gas market. The supermajor was able to exploit the "incredibly fragile" gas market, she said, which was a key factor driving the success of its integrated gas business. "Those opportunities are what we typically seek and enjoy," Gorman said. Increasingly, producers have also been adapting to a more volatile market by switching production on and off in response to prices, but often without revealing the price at which a supply response will occur. Expand Energy, for instance, told investors in October that it was amassing drilled but uncompleted wells and wells that had yet to be brought on line, which it could activate relatively quickly when prices rise. It declined to name the price at which that would occur. Market participants, attempting to price in this phenomenon by anticipating producers' next moves may respond more dramatically to supply signals than in the past, when production was steadier. Producers' increased responsiveness to prices could help to balance the market somewhat, though more aggressive intervention into operations could take a toll on well performance and pipelines, FactSet senior energy analyst Connor McLean said. Producers are "treating the reservoir itself like a storage facility", Price said. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Japan’s Chugoku restarts Shimane nuclear reactor early

24/12/23

Japan’s Chugoku restarts Shimane nuclear reactor early

Osaka, 23 December (Argus) — Japanese utility Chugoku Electric Power restarted the 820MW Shimane No.2 nuclear reactor for test operations on 23 December, two days earlier than originally planned. The No.2 reactor at Shimane in west Japan's Shimane prefecture was reconnected to the country's power grids for the first time in nearly 13 years, after the reactor shut down in January 2012 for stricter safety inspections following the 2011 Fukushima nuclear meltdown disaster. Chugoku reactivated the Shimane No.2 reactor on 7 December, aiming to resume power generation on 25 December. But the target date for commercial operations remained unchanged on 10 January, despite the earlier than expected restart. The Shimane No.2 reactor will be a vital power source as the sole nuclear fleet in the Chugoku area, to help enhance the resilience of the power supply structure, stabilise retail electricity prices and reduce CO2 emissions, said Japan Atomic Industrial Forum's president Hideki Masui on 23 December. The Shimane No.2 reactor is the second boiling water reactor (BWR) to be restarted after the Fukushima disaster, following the 825MW Onagawa No.2 BWR unit that resumed test generation on 15 November, with normal operations scheduled to restart on 26 December. The BWR is the same type as that involved in the meltdown at the Fukushima Daiichi plant. The restart of the two BWRs would pave the way for Japan's nuclear restoration, as 15 BWRs — including advanced BWRs — are still closed in the wake of the Fukushima disaster. Japan has restored 14 reactors as of 23 December, including the Shimane and Onagaw reactors, of which 12 are installed with a pressurised water reactor (PWR) design. Nuclear power's share The Japanese government last week set a target of 20pc for nuclear power's share in the country's draft power mix for the April 2040-March 2041 fiscal year, under the triennial review for the country's Strategic Energy Plan (SEP). Tokyo is seeking to restart all existing reactors to achieve the 20pc goal, adding that replacement reactors would also be possible. The draft SEP allows nuclear power operators that had decommissioned reactors to build next-generation reactors at their nuclear sites, not limited to the same site. The previous SEP did not mention building new reactors or replacements. Japan's Federation of Electric Power Companies (FEPC) has applauded this progress, but FEPC chairman Kingo Hayashi noted that it was disappointing the SEP did not mention a nuclear capacity target which the FEPC had requested. It also did not include building new reactors or the expansion of existing nuclear plants, Hayashi added. By Motoko Hasegawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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