U.S. coal production has been steadily declining. It is barely half of what it was just ten years ago. While a shift toward cleaner burning fuels has definitely played a role, the more likely economic driver has been the cheap cost of natural gas with the proliferation of shale gas drilling, according to Stifel’s maritime industry update released today. In fact, coal consumption for power generation in the U.S. continues its domestic downward trend. It’s down over 10% for the first half of 2018 over 2017.
The Trump administration has made big promises for the restoration of coal production, but unfortunately for legislators, it is not regulation alone that has been causing production declines, and it is hard for a capitalistic country to completely diverge from capitalism. However, while domestic consumption continues to fall, there has been a sharp increase in exports as oil and natural gas prices internationally are on the rise, making the economics of coal-fired power generation more compelling, and thus drawing out more U.S.-based production.
U.S. coal exports totaled 10.1 million metric tons in April, the highest monthly total since March 2013, according to new U.S. Census data. For the first half of the year thus far, coal exports are up nearly 24% over the same period last year. Ultimately, U.S. coal exports make up only about 7% of global coal trade, and are dwarfed by regions like Australia, South Africa, and Indonesia. However, with 80% of global coal exports headed to Asia, the ton-mile impact on shipping from a rise in U.S. export has real significance.
At the same time, grain is finding an unexpected home. Just two months ago, FreightWaves reported on the historic lows the price of wheat was seeing, falling spectacularly by 36% over the past three years, plunging beneath the break-even point for wheat production in the U.S., to an unsustainable rate for local cultivators. This led to a near century record low in wheat production. Exports were also frustrated by both tariffs and an abundant Russian grain harvest.