Asia’s Need for Coal Is Potential Bonanza for U.S. : Energy: Mining companies, railroads and ports could do a booming business supplying fuel for Asia’s coal-fired power plants.
During the next decade, electricity demand around the ever-brightening Pacific Rim will likely quadruple the capacity of Asian coal-fired power plants, opening an enormous potential market for U.S. coal.
With it could come a big market for environmentally advanced clean-burning technology, if U.S. firms can stay in the competition.
Now, U.S. mining companies, engineering firms, railroads and the ports of Long Beach and Los Angeles--the major West Coast steam-coal shipping terminals--are gearing up for the blossoming trade.
U.S. coal producers east of the Continental Divide have long shipped metallurgical coal--used in steel making--to the Far East. But Betsy Kraft, director of international trade for the National Coal Assn., predicted, “The big growth will be in steam coal.” Steam coal, the type used to generate electricity, and found in quantity in the western United States, has so far been a small part of the U.S. overseas trade.
U.S. steam coal exports tripled from 1988 to 1989, according to Charles Oddenino, an industrial specialist with the Commerce Department’s International Trade Administration.
“We expect that level to be maintained or increased,” said Oddenino, “and a lot of that coal is moving out of the Utah basin and through Long Beach.”
Coal will most likely be used to meet much of the booming demand in Pacific Rim nations, despite its environmentally tawdry history, in part because oil prices are forecast to rise and Asian oil supplies are limited, said Jack Kulp, a project fellow specializing in the Asian coal market at the East-West Center, a research institute in Honolulu.
“People have to move a lot of their hydrocarbons over to lubricants and transportation (gasoline),” said Kulp. “They’ve almost got no choice.”
Meanwhile, low-sulfur coal and clean-coal technology, being developed primarily in the United States, Western Europe and Japan, will be able to reduce plant emissions to the level of natural gas and other cleaner fuels, making coal acceptable, particularly as a transitional energy source until renewable energy technologies come on line.
Mainland China already produces 70% to 75% of its energy from its own extensive coal reserves. Australia, Indonesia and Thailand also have big coal deposits. Indonesia plans to begin coal exports. Australia already is a major exporter. But high labor costs and wildcat strikes have forced up the price of Australian coal--from $29.40 per metric ton in 1987 to $40.85 a ton this year.
This has made U.S. steam coal competitive in the Pacific Rim market--primarily in Taiwan, Japan and South Korea, which are poor in coal but use a lot of it, already consuming substantial amounts of U.S. metallurgical coal.
Pen Coal Corp. of Brentwood, Tenn., one of the biggest U.S. exporters, has been shipping to Taiwan since 1982. But most of the additional U.S. steam coal will be mined in the Western states, according to Kraft of the National Coal Assn., since they are closest to the Pacific Rim nations. Transportation just to dockside can make up as much as 40% of the cost of coal.
The Bull Mountains Coal Mine, near Billings, Mont., for instance, will send 60,000 tons of coal this year to be tested in Japanese power plants. If its coal meets Japanese requirements, the mine, owned by Meridian Minerals Co., a subsidiary of Seattle-based Burlington Resources Inc., could be shipping coal by the end of 1991 or early in ’92.
“Basically, starting in ‘88, U.S. coal became competitive with Australia,” said Ted Hanks, vice president-coal of Meridian, “and it should remain so . . . hopefully in the next five years.”
U.S. railroads--deregulated during the 1980s--as well as deep-water port managers get much of the credit for this.
“To try to stay in the market and take advantage of the growth, everybody--the coal mines, the railroads and the ports--tried to work more efficiently,” said Bill Nock, energy market manager for Union Pacific Railroad. “And we were able to pretty dramatically reduce prices.”
Coal prices of $60 a ton in the early 1980s dropped to under $40 a ton last year, noted Nock. Yet some believe that eternal vigilance to cost cutting will be needed.
While the Port of Long Beach has two loading berths with substantial capacity, the Port of Los Angeles is promoting a project that would increase its annual export of 1 million tons by 10 or 15 times, lowering the expensive time taken to load ships.
But Charles Johnson, head of the coal project at the East-West Center, said he believes that the continuing challenge will be to reduce the railroad transportation costs.
“That’s the only place where there’s much room to continue to make advances,” he said.
As for clean-coal technology, Johnson and others say they expect it to be adopted gradually, as Asian nations tighten their environmental standards. Only Japan, and to some extent South Korea, have environmental laws that would force the investment in such advanced technology now. Johnson expects that South Korea may start buying advanced technology by the mid-1990s, with Taiwan, Hong Kong and Indonesia making the leap after the turn of the century.
Still, now is the time for U.S. technology firms to beef up their marketing, said Johnson. While they may enjoy a technological lead in clean-burning equipment, the Japanese “have the marketing advantage across the board in Asia.”
“It’s not going to be an easy market to crack,” said Peter Cover, program manager of coal and technology exports for the Energy Department. The competition to sell technology is likely to be particularly tough over the next five or 10 years, as countries choose among competing systems, Cover notes.
“The Japanese are in there bidding very hard,” he said, “and the Germans are in there.”
“The U.S. technology advantage will not give the U.S. a long-term advantage in Asia,” Johnson said, “unless we can compete on the marketing side with Japan and Korea, our two very, very aggressive competitors.”
Meanwhile, although China has a tremendous, growing electricity demand and ample coal reserves to meet it, no one can see how the Chinese can afford the high capital costs of using clean-coal technology. Emissions of carbon dioxide, which scientists believe contribute to the “Greenhouse” effect, directly result from the use of traditional, “dirty” coal-burning techniques. Ron Wolk, director of the advanced fossil-power program at the Electric Power Research Institute in Palo Alto, considers the problem to be of global importance.
“If China expands its CO-2 emissions, it will dwarf the 20% that people have used in conversation as a goal for the United States to save” with its own application of clean-coal technology, Wolk said.
INTERNATIONAL COAL CONSUMPTION
Quadrillion British Thermal Units consumed by the following nations in 1988.
China: 19.51
United States: 18.8
Soviet Union: 14.0
Poland: 5.28
India: 3.83
West Germany: 3.5
South Africa: 3.15
Japan: 2.9
United Kingdom: 2.69
Source: U.S. Energy Information Agency
SHIPPING DISTANCES
Perhaps the most substantial factor in the future competitiveness of U.S. coal, according to Charles Johnson, a mineral economist and head of the East-West Center’s coal project, will be the cost of overland rail transportation from mine to deep-water port. A comparison of these distances shows the challenge to U.S. railroads to keep rates low:
* Western U.S. coal is shipped a minimum of 900 miles by rail to a deep-water port; rail lines fully developed.
* Eastern U.S. coal (considerably more expensive to produce) is typically shipped 500 miles by rail; rail lines fully developed.
* Australia, the largest exporter of steam coal in the Pacific Rim, typically ships its coal 125 miles; rail lines fully developed.
* Colombia, about 100 miles; Developed rail lines will be expanded in the 1990s).
* Venezuela, about 50 miles; no rail; will be developed in the 1990s.
* Indonesia, less than 50 miles; rail under development.
