Asia’s influence over the US coal export market will continue to grow as demand from traditional international customers fades, industry members said at a conference today.

“We all expect that demand in the Atlantic market is going to be down, or flat at best,” Jack Porco, president of US producer and trader Xcoal, said at the Coaltrans USA conference in Miami. “The demand is in Asia.”

Interest from Mediterranean and north African countries will also be a factor, Porco said.

Executives at the conference generally expected US exports this year to be flat with 2018 levels. That is generally good news, considering where shipments likely ended up last year.

Monthly exports doubled from the middle of 2016, when supply disruptions and increased demand from some countries started to drive up prices, to an average 8.78mn short tons/month (7.97mn metric tonnes/month) in January-October 2018. The gains have been shared by metallurgical and thermal coal suppliers.

Exports accounted for about 15pc of US production last year, the most since the 1980s, said Hans Daniels, chief executive of consultant Doyle Trading Consultants. And the influence of exports on the US market could continue to have a larger effect going forward as domestic demand continues to shrink.

Executives pointed to India as a growing customer for both US thermal and coking coal. India was the primary factor around Northern Appalachia coal export growth in 2018 and has had a growing influence on Illinois basin exports, Daniels said. That demand is primarily from Indian cement makers, said AM Dharam, head of the coal procurement group at Tata Power. Power producers import less high-sulfur coal because of clean air rules and the fact that many facilities do not have the ability to blend the product with lower-sulfur options.

Dharam said one opportunity for US high sulfur coal in India is if India produces less petroleum coke. He did not say if that would happen.

Chinese demand for global thermal coal will likely slide by around 9pc through 2040 because of environmental policies, said Greg Marmon, a senior research analyst at Wood MacKenzie. But that drop will be supplanted by increased interest from other Asian nations, he said.

Coking coal demand in China may be more robust.

But fluctuations in China will have more of an ancillary effect on the US industry. And coking coal trade will be more directly tied to China’s policies on steel exports and coke exports than to tariffs, Xcoal’s Porco said.

Xcoal recently has seen more demand for US coking coal from China because companies there are looking for product with lower sulfur and ash to satisfy environmental restrictions.

The shift in which markets are dominant for US coal also could affect which prices are used as benchmarks for US coal.

“You could make the argument that the relevance of API 2 is changing down and relevance of Newcastle (pricing) is increasing,” Matthew Moore, a senior trader at Vattenfall Energy Trading said.

That is of mixed effect for US coal. While pricing out of Newcastle, Australia, has been stronger than delivered European coal prices, freight costs between the US and Asian markets typically are higher, further limiting prices US sellers can attach to their sales.

The increasing exposure to Asian markets in general makes US exports more sensitive to freight rate fluctuations, executives said. Multi-year lows in freight last year helped give US coal a competitive advantage over markets that are closer to Asian customers, they said. They did not provide expectations for freight rates.

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