Coal trade in the Americas has been under a lot of strain over the past year or so, and most operators on both the supply and demand sides have been experiencing great challenges. This is true from Canada to Argentina and Chile. Some operators have faired better than others, but on balance there was little to celebrate when 2015 came to an end. This year is proving challenging again, but most market players believe 2016 will not be as bad overall as last year. There is also optimism that improvements will be seen in 2017 albeit from a low baseline.

On the demand side in the Americas, in Argentina, coal demand at the AES Central Termica de San Nicolas was a little lower in 2015 compared to the previous year. The total recorded was 810kt compared to 840kt the year before. Colombian suppliers achieved over 60% of the market, with South African shippers making up the remainder. State- owned Yacimientos Carboni´feros Rio Turbio is due to supply up to 1.2mtpa (million tonnes per annum) of domestic thermal coal to the 240MW Central Termoelectrica de Rio Turbio in Santa Cruz following commissioning this year. Coal demand in Argentina is expected to be steady during 2016 with around 820kt burned at CTSN and a total of about 1mtpa imported this year. The outlook for next year remains steady.

Brazil imported 21.5mt (million tonnes) of coal in 2015 which was an increase of 1.2mt compared to the previous year. 

Imports from Colombia increased by 1.1mt to reach 6.2mt.Australian shippers delivered 5.9mt in 2015 which was an increase of 1.5mt compared to 2014, and Russia shipped 1.4mt which was an increase of 0.4mt compared to the previous year. US shippers saw a decrease in deliveries of 1mt to result in 6mt overall. Canadian exporters also saw a decrease in volumes of 0.8mt to record 1.4mt in 2015. Total thermal coal imports by Brazil in 2015 reached about 7mt last year which  was an increase of around 1mt. A lack of hydro availability contributed to this increase.

Eneva is expected to burn slightly more coal in 2016 compared to last year at 2.2mt. Alunorte is expected to increase demand to around 750kt in 2016 from 740kt last year. Other demand will come from Vale’s Mineracao Onca and the Alumar aluminium smelter which will take a combined total of more than 750kt per year. Demand from Puma is likely to be about 375kt, while InterCement is burning more petcoke reducing coal import demand this year to about 200kt. There has been no progress on the construction of the planned 600MW Amapa and 600MW Para coal-fired power stations yet. Thermal coal imports by Brazil in 2016 are forecast to be fairly steady.

Chile imported less thermal coal last year, with Colombian shippers taking a large hit on trade and losing around a third of business compared to the previous year. Coal imports decreased by some 1.5mt in 2015 to around 8mt. The loss of power generation at Endesa’s Bocamina power station earlier in the year contributed to this. Australian exporters, however, gained considerable extra market share with more than 1mt shipped to Chile in 2015. Chile’s export trade was also more sluggish last year compared to the previous year, with most of the tonnage going to India from the Invierno mine. Output from that operation decreased due to market conditions as demand fell and prices continued to decline for the country’s sub-bituminous product. Nevertheless, a few cargoes found their way to Europe, with the Netherlands and Spain recording some imports during the year. The country’s own demand for electricity grew by about 2% in 2015 but this was lower than had been forecast due to the slowdown in some industrial sectors such as mining, and milder winter weather. As well as coal, other mining products such as copper and iron ore have seen depressed markets and this has impacted Chile’s mining sector and further investment in the medium term. Some 40% of the country’s electricity demand is from the mining sector, so this is an important factor in determining power demand. On the positive side for coal, there are two new coal-fired power stations, Cochrane and Guacolda V which should boost demand from 2016 onward. There could be an extra 1mt required in 2016, with a further 0.5mt next year if the new capacity comes into full operation.

In Central America, in the Dominican Republic, coal import demand has been around 1mtpa but this could increase if a major new project is commissioned. AES Dominicana takes about 0.75mtpa of Colombian coal for the Itabo power plant, while EGE Haina can use around 0.17mtpa. The cement sector has been importing about 0.15mtpa of Venezuelan coal for Cementos Nacionales and Cementos Cibao. Towards the end of next year, the new 680MW Santa Catalina coal-fired power station is expected to be commissioned and coal demand could reach 2.4mtpa.

In Guatemala, Jaguar Energy commissioned its new 300MW coal- fired power station last year, and thermal coal demand was boosted in the second half to result in the country importing 1.85mt by year end. This was an increase of 0.35mt compared to 2014, with Colombian shippers supplying almost all of the tonnage. Central Generadora Electrica (CGE) imported the bulk of the coal for its San Jose´ plant (0.4mt), Costa Sur and Santa Lucia plants (0.2mt), and about 0.25mt for supply to sugar producers and general industry consumers in the country. Cementos Progreso requires around 30ktpa while Duke Energy has been needing about 0.3mt at the Las Palmas power station. Jaguar Energy is ramping up its electricity output this year, and is forecast to require just under 1mt of imported coal at full capacity. Competition from oil-fired generation amid low prices, however, could affect Guatemala’s coal demand for the foreseeable future.

Honduras imported a small quantity of Colombian coal last year for the Envasa plant which takes about 20ktpa, plus about 23kt for Electrica del Sur’s sugar mill at La Grecia. The mill can import 40kt of thermal coal but demand varies depending on gas availability and unused coal stocks being carried over each year.

Cementos Panama imported 110kt of Colombian coal last year, with consumption expected to be level this year. The Bahia Las Minas power plant took 0.28mt of coal in 2015 and is also forecast to have level consumption in 2016. Colombian coal is supplied by Sator.

Mexico’s Comision Federal de Electricidad imported about 6mt last year, which was about 0.8mt higher than the year before. This year, CFE is expected to require a similar amount of thermal coal. By the end of 2015, the national utility had coal stocks sufficient to see it through to June this year at the Petacalco power station. Steady demand this year is likely to increase after 2017 if the Pacifico II and Pacifico III power stations are commissioned. These have a combined capacity of 1,400MW. In the mix recently, there was lower hydro generation in 2015 due to lower rainfall, but nuclear generation grew by some 25%. Gas also competed with coal in 2015 as prices were lower.

Peru’s thermal coal demand is based on the 135MW Enersur power station, and it amounted to 0.07mt in 2015. High coal stocks and competition from hydro, gas and oil at the other generating facilities in the country caused thermal coal demand to decrease last year from a more usual 0.3mt. This year the total is likely to increase to more than 0.3mt. No new coal-fired power stations are planned for Peru, but there are plans to build an interconnection with Chile with a possible capacity of 1,000MW. Demand for coal from the cement sector is facing competition from petcoke and Peru’s domestic anthracite resource. Cement producers Unacem and Pacasmayo required about 0.2mt last year, but this is forecast to decrease to about 0.18mt in 2016. Peru’s total coal imports reached about 0.3mt in 2015 which was a decrease of some 0.2mt compared to 2014. Enersur is forecast to require more imports this year. Demand for thermal coal imports in the United States was lower in 2015 compared to the previous year at under 10mt. Most of this was supplied by Colombia which was able to increase its trade by a few hundred thousand tonnes at the expense of shippers from Venezuela. Indonesian shipments to lower last year compared to 2014. Thermal coal imports have been in competition with low gas prices in the US for power generation, seeing some of the lowest ratios in the fuel mix during 2015. The milder weather as winter approached, also led to lower deliveries being required by domestic suppliers at the end of the year. Stockpiled coal was used where possible as levels had been approaching maximum capacity on the pads in some cases, further reducing demand for imported thermal coal.

US consumers have been seeing excess supply despite reductions in output to try to address the imbalance in the market during 2015. This has not been positive for international trade and so the levels of thermal coal imports has been low. Forecasts have suggested that there will be little change this year, and with 2017 far enough away, some were predicting that as the earliest any change might begin to be seen. A rise in the price of natural gas is expected to be one main prerequisite for an upturn in the thermal coal market in the USA at this stage. With little movement so far this year, things continue to be depressed for producers in the country. The main coastal buyers of imported thermal coal keep an eye on bargains in the international market amid such conditions, and some tonnage still finds its way to the US ports at the time of writing. However, demand remains fundamentally low. Total thermal coal imports for 2016 are expected to be lower than they were last year, with the situation remaining unclear into 2017.

Canadian thermal coal imports were low in 2015 at around 2mt and are expected to decrease this year due to additional production at the Donkin mine which is expected to supply Nova Scotia’s Lingan power station. Most of the imported thermal coal came from Colombia, with the USA making up the remaining 12% or so. The main consumers of coal include Nova Scotia Power which can burn almost 3mtpa as well as several hundred thousand tonnes of petcoke.

Imports, mainly from Colombia have been shipped to Point Tupper and Sydney for consumption at the Trenton and Lingan power stations. New around 1mtpa of thermal coal at present, as well as around 200ktpa of petcoke.

On the supply side, Canadian thermal coal exports were down by around a third last year compared to 2014 at a couple of million tonnes or so. The Asian markets were weaker during the year with Japan remaining the key buyer amid the fall in demand for imported Canadian coal there.
Shipments to Taiwan decreased by over two thirds, and China showed little interest throughout the year.
Despite the weaker export market, Ridley Terminals reported an increase in exports of 32% in 2015 compared to 2014 amounting to 1.97mt. This was 0.48mt higher than was reported in 2014. December was a busy month last year, with 0.31mt reported shipped. Some of that tonnage is believed to have been US product from the Powder River Basin. On other side of the country, Nova Scotia Power is expected to take thermal coal from the Donkin mine over the course of 2016, 

 Brunswick Power imports  which is mainly a coking coal operation. It has a capacity of 3.6mtpa but is not expected to produce that much coal this year. Some exports are possible through Sydney, Nova Scotia, so this operation could impact the trade figures in the export and import markets in the coming years. Colombian and US traders are likely to be mainly affected. The state of the coal market is keeping development of the large resource at the Vista project in Alberta on hold. If conditions were favourable, the mine could produce well over 10mtpa and export through Ridley Terminals on the west coast into Pacific markets. Canada’s export trade is expected to be fairly flat for this year and the foreseeable future after the decreases seen in 2015.

The US thermal coal export market was also depressed in 2015, with around 24mt shipped. This was half the level seen just three years earlier. The US is exhibiting its historic role as the swing supplier in the market, entering when prices are high but being less active when prices are low. Competition from Colombian exporters into the Atlantic markets both north and south also affected exports last year, and this is expected to continue this year. One sector that did see some positive results in 2015 was the demand from India for Illinois coal, recording more than 2mt shipped which was over twice that seen in the previous year. Indian demand for this product this year, however, is expected to be lower.

Production cuts in the USA are expected to continue this year and for the foreseeable future following the substantial decrease of some 100mt last year. With weak demand in the domestic markets as well as little opportunity for improved business in the export sector, the US coal miners are facing a prolonged difficult time. There appears to be little prospect of improved demand for US coal of all qualities at the time of writing. The start of this year saw declines in output while coal stocks were also plentiful during the winter months. Electricity generators had been seeing the highest stock levels for more than two years at that time. Weather patterns have not helped coal consumers to significantly reduce their stockpiles either. Competition from low gas prices has also hindered the thermal coal sector, and low oil prices have been persisting during the past months of 2016 as well. Low prices for coal in the US are expected to remain at present, and with a similar softness in the international markets the motivation to reduce coal output will continue, probably until 2017 or later.

Given the subdued international thermal coal market the expectation has been for a further decrease in US coal exports this year. Some forecasts have suggested a decline of some 10mt by the end of 2016. Next year is expected to see some further decreases but perhaps to a lesser extent than the previous couple of years. The only market with reasonably firm demand is India, but shipments of Illinois Basin coal are not going to be large in this environment of low prices. India has also been looking to import higher quality material than has been the case in the past.

Colombian thermal coal exporters bucked the trend in 2015 and recorded an increase in shipments to 80.5mt. This was an increase of 5.5mt or 7.3% compared to the previous year, but it was still below the optimistic target of 84mt set earlier by the Colombian coal producers. Their main markets in Europe were weak in 2015 but economics allowed them to compete strongly with the likes of the USA, South Africa, and Russia throughout the year. They may have shipped even more, displacing competitors’ tonnage, if there were not the restrictions on coal railing in Colombia. Night time transport from the mines to the ports on the Fenoco rail line had been restricted on environmental grounds. Drummond was able to return to full activity in 2015 after the port disruption in 2014. The company exported 27.9mt of thermal coal which was an increase of 6.1mt compared to the previous year. Cerrejon and Glencore had a weaker year in 2015 with 33mt and 16.4mt exported respectively. 

The Colombian thermal coal exporters increased their shipments into Europe by about 4.6mt in 2015 taking the total to that region to 57.6mt. Buyers in Turkey and Portugal took advantage of lower prices, as well as those consumers in Italy. The Netherlands also recorded increased intake of Colombian thermal coal which was destined for various northwest European end users. The United Kingdom was not taking as much however, and the total Colombian tonnage imported in 2015 decreased by around 2.8mt overall as coal-fired power station closures largely to comply with European Union emissions regulations took a further toll on the United Kingdom coal sector. Contract tonnage to consumers in the southern USA also proved firm during 2015, with some 6.3mt shipped there. This was actually an increase of 0.8mt compared to 2014. Growth in exports of thermal coal was also recorded to Brazil with an extra 0.6mt sent there last year. Guatemala also imported 0.5mt more Colombian thermal coal in 2015 which helped make up some of the 1.3mt decline in demand from Chile. Pacific thermal coal markets declined by some 0.9mt during 2015.

Border closure between Colombia and Venezuela in August 2015 due to suspected criminal activities affected coal shipments through the Venezuelan ports. Some 0.3mt is believed to have been involved by the end of the year. The Venezuelan coal industry saw further contraction in 2015, recording a decrease of 0.4mt in thermal coal exports to just 1.6mt compared to 2014. The main coal exporters, InterAmerican and Carbones de la Guajira shipped just 0.52mt and 0.82mt respectively. The increase in exports to the USA and Guatemala by Colombian shippers mentioned above was at the expense of the Venezuelans who saw a decrease of 0.12mt and 0.14mt to those countries respectively. Guatemala only imported 66kt of Venezuelan coal in 2015 while the USA took only 180kt. The European markets took 62kt less thermal coal from Venezuela last year, and the exporters sold 92kt less material to the Asian consumers compared to 2014. This year is expected to remain a difficult one for the Venezuelan coal sector, with little improvement likely for the foreseeable future.

The coal industries in the Americas are coping as best they can in this ongoing depressed environment during 2016. There may be some improvement next year, but with market fundamentals being the way they are, until there is a significant change in the supply demand balance, low price environments will continue to damage producers. With signs of an improvement in some markets in recent weeks, there has been some optimism from some coal investors. They are, however, looking at things from a depressing position which they have had to endure for a number of years now. Coal trade in the Americas during 2016 is looking to be varied, and some will be luckier than others. 

Dr Tim Jones is Director of Consultancy and Editor of the weekly publication Coal Market Intelligence which covers 11 spot markets worldwide, gives key information on the latest deals and tenders, company news, people and jobs, industrial relations, and ports, shipping, and freight rates. DC