US coal mining companies have recently seen a major decrease in production; Colombian coal cheaper, high quality.
Coal imports to North America, and specifically the United States, have risen dramatically even as Central Appalachia has seen a number of mines close.
The reason: price. Costs to transport coal from Central Appalachia is 173% more expensive than to import
from Colombia – a country where coal is cheap to acquire and can be shipped in higher quantities. Research firm IHS Energy calculates that the average load of coal from the US costs $26 per ton to ship while Colombian coal averages just $15/ton. Lower labor costs also contribute to the disparity in price. Colombian coal is, on average, $4 cheaper per ton than US product.
China, the largest coal importer in the world, has seen a weaker demand in coal use this year. Europe’s declining imports have also added to the depressed coal prices.
The first six months of 2014 saw a surge of coal imports. The US bought more than 5.4 metric tons between January and June which is a 44% increase from the same period in 2013. Only one-third of this was purchased domestically. Colombian coal companies ramped up production by 24% to meet the increased demand.
The US Energy Information Administration predicts that US coal consumption will rise to 862 tons by the end of the year. The expected increase is directly related to a frigid start to the year when power companies used more coal to produce electricity than expected.
Birmingham, Alabama-based Drummond Co. anticipates that its two Colombian mines will produce nearly 30 tons of coal this year. The company refused to comment on the fundamental cause of the ramped up production but said that reflected a 19% production increase.
US coal producers are working toward creating competitive pricing as the year progresses. Rail company CSX has announced plans to increase its fleet to over 4,700 locomotives by year’s end and Burlington Northern Santa Fe Corp. will add 5,000 new cars.