Coal is getting caught up in Trump’s burgeoning trade war

Source: By Dino Grandoni, Washington Post • Posted: Thursday, June 21, 2018

JENNER TOWNSHIP, PA: Construction continued on Corsa Coal’s new Acosta Deep Mine in 2017 in southwest Pennsylvania. (Justin Merriman for The Washington Post)

President Trump, with nearly every energy policy decision, has privileged coal above all forms of electricity production.

But one of the unintended consequences of his aggressive trade policy is that China is promising to retaliate against Trump’s imposition of new tariffs by aiming to hit the U.S. president where it hurts him politically — in coal country.

In his latest volley to shrink the trade deficit the United States maintains with China, Trump last week announced tariffs on $50 billion in products from the world’s second-largest economy. In response, China struck back by unveiling commensurate tariffs on $50 billion in U.S. products. China seemed to target Trump voters in rural areas by including farm products, oil, natural gas and coal on the list.

But the effect of any additional tax by China on U.S. coal may be more political than economic. Energy analysts note China is just one of many customers for U.S. coal. In 2017, China imported 3.2 million tons of U.S. coal — or just over 3 percent of all American coal exports that year, according to the U.S. Energy Information Administration (EIA).

Experts say the United States would probably be able to find other buyers abroad for that sliver of coal shipments.

“I wouldn’t predict that there is no disruption,” said Pavel Molchanov, energy analyst at the investment firm Raymond James, “but it’s a short-term effect.”

Exports have been a bright spot for the U.S. coal sector after Trump’s election. Last year, U.S. coal exports jumped by 61 percent from 2016 levels. Just last month, China was considering purchasing more coal from the United States to narrow the trade deficit between the two nations, Bloomberg News reported.

Most of the coal the United States ships abroad is used not for running generators at power plants, but for making steel.

As prices from metallurgical coal, or simply “met coal,” have risen over the past two years, U.S. met coal exports grew by more than a third between 2016 and 2017, according to the EIA. The first new coal mine to open during Trump’s presidency was Corsa Coal’s Acosta Deep Mine in Pennsylvania, which produces met coal.

Like many nations, China purchases a “notable amount” of met coal from U.S. firms such as coal giant Peabody, according to Chiza Vitta, a coal analyst at Standard & Poor’s. But much of that coal comes from American operations in Australia, the world’s largest met coal supplier, he said.

“Assuming that those assets in Australia are not subject to the tariff,” Vitta said, “we do not expect this to have a significant direct impact.”

Outside of steelmaking, the world’s most populous nation says it is trying to wean itself off burning coal for electricity because of pollution concerns. , whose cities are smeared with smoggy skies,

“China is making strong efforts to shift its electricity mix away from coal,” Molchanov said, “partly for climate considerations, but even more importantly, because of the public-health crisis caused by coal-related pollution.”

Because China has yet to determine the date of the fuel tariffs, coal industry representatives are cautious but concerned.

“We’re obviously watching it closely,” said National Mining Association spokeswoman Ashley Burke. “So anything that would chip away at the appetite for U.S. coal abroad would be of concern. At the same time, given that just two weeks ago we were being asked about China’s rumored plans to increase coal imports from the U.S., we don’t want to get ahead of developments before anything occurs.”

The brush with China is dwarfed by the economic head winds the coal sector faces at home.

Coal-fired power plants continue to shutter because of competition from cheaper natural gas, solar and wind generation. A new report from Bloomberg New Energy Finance this week concluded that coal will be pushed out of the power market over the next three decades as the cost of renewables continue to decline. The report predicts there will be $11.5 trillion of investment in electricity generation through 2050, of which $9.8 billion will go to wind, solar and other zero-emissions technologies such as hydropower and nuclear.

The situation has become dire enough for coal suppliers for Trump to order Energy Secretary Rick Perry to halt the closure of electricity generators running on coal as well as nuclear power by using emergency powers.

“The industry has much more immediate challenges closer to home,” Ethan Zindler, an analyst with Bloomberg New Energy Finance, said in an email.