U.S. coal miners worry Trump-China trade dispute could hit exports

Bluestone Resources

25/06/2018 17:38

By Valerie Volcovici
    WASHINGTON, June 25 (Reuters) - U.S. coal mining companies
are worried President Donald Trump’s intensifying trade dispute
with China could hurt their booming export business, one of the
ailing sector’s most important lifelines, according to industry
players.
    Beijing this month added coal and other energy products to a
list of U.S. goods facing import tariffs in retaliation for
Trump administration levies. The measure has already dampened
Chinese demand for U.S.-mined coal, multiple U.S. and Chinese
industry sources said.
    For instance, trade sources said China National Building
Material International, one of the biggest metallurgical coal
importers in China, pulled back from supply talks with U.S. coal
broker XCoal and miner Consol Energy  CEIX.N  shortly after
Beijing’s announcement.
    A source familiar with the matter said Consol had been in
talks with China to supply up to 1 million tons per year of
metallurgical coal but would not confirm whether the deal would
be delayed. 
    Officials at XCoal declined to comment. 
    "We’re obviously watching it closely, particularly given
what a bright spot exports have been for our industry of late,"
said Ashley Burke, a spokeswoman for the National Mining
Association, which represents U.S. mining companies.
    "Anything that would chip away at the appetite for U.S. coal
abroad would be of concern."
    The U.S. Energy Information Administration said U.S. coal
exports to Asia doubled from 15.7 million tons in 2016 to 32.8
million tons in 2017. Exports to China totaled 3.2 million tons
in 2017, up from zero in 2015 and 2016, according to the EIA.
    The coal industry's concerns mirror the unease spreading in
U.S. farm country over unintended consequences of the Trump
administration’s protectionist stance, which has roiled foreign
market for American crops. The farm and coal industries are
critical Trump supporters that the president and his Republican
party are relying on to help them retain control of Congress in
the mid-term elections in November.
    
    "WALKING A TIGHT ROPE" 
    Steve Roberts, president of the West Virginia Chamber of
Commerce, said Trump's protectionism was a "dilemma" for his
organization, which represents a number of companies benefiting
from the export trade.
    "Because of our small population, we export far more than we
consume," he said. 
    "We are concerned about the momentum slowing down... We are
literally holding our breath to make sure this dispute is part
of a bigger picture... and the parties see the advantage of
trade with each other."
    Jason Bostic, vice president of the West Virginia Coal
Association, said he hoped the dispute would blow over, or at
least that the Trump administration’s steel and aluminum tariffs
would boost domestic demand for metallurgical coal. U.S. demand
for met coal is currently about 23 million tons a year, and
could rise if U.S. steel manufacturing increases.
    “We are walking a tight rope,” he said.
    The addition of coal to the list of more than 650 items
facing higher tariffs from China also came as a shock to Chinese
steel mills and trading firms. Just last month, Beijing had been
encouraging them to buy more U.S. coal to narrow the trade gap,
four sources with knowledge of the plan said.
    Coal operators like Pennsylvania's Consol had been in talks
with Chinese buyers, and hope those talks revive.
    "Long-term we think that coal will be part of the solution,
with China buying U.S. coal to offset the trade deficit," said
Zach Smith, a spokesman for Consol. 
    A number of Appalachian operators are banking on it.
    In a May investor presentation, Corsa Coal  CSO.V  said it
was aiming for 4 million tons per year of metallurgical coal
sales by 2020 with 70 percent for export and 30 percent
domestic. In its presentation, Corsa said Chinese and Indian
infrastructure as well as a rising population were positive
drivers for coking coal to serve growing demand for steel.
    Corsa Coal did not respond to a request for comment.  
    Earlier this month, Bluestone Coal  BSR.V , owned by the
family of West Virginia Governor Jim Justice, announced it
planned to hire 250 workers for two reopened mines and two new
metallurgical mines in West Virginia. Some 70 percent of its
coal is marketed for overseas export.
    A representative for Bluestone could not be reached for
comment.

 (Reporting By Valerie Volcovici; additional reporting by Meng
Meng in Beijing and Timothy Gardner in Washington DC; Editing by
David Gregorio)
 ((valerie.volcovici@thomsonreuters.com; +1 (202) 898 8373;
Reuters Messaging:
valerie.volcovici.thomsonreuters.com@reuters.net))