The amount of coal shipped from U.S. shores rose during the second quarter, buoyed by robust demand from international markets, particularly in Asia.

Exports of U.S. coal jumped 52.5% year over year to 20.6 million tonnes in the June quarter from 13.5 million tonnes, according to an S&P Global Market Intelligence analysis.

In 2020, the COVID-19 pandemic caused electricity consumption to tank, decimating demand for U.S. coal. But the economic recovery in 2021, combined with stronger international coal demand, especially from China, has led to a resurgence in coal exports. What is more, low investment in coal over roughly the past decade made it challenging for the industry to keep supply on pace with demand when markets did recover.

“When you put that all together, these factors have created — at least for the time being — a better environment for the U.S. coal industry, particularly Eastern producers that are able to export,” said Benjamin Nelson, global lead analyst for coal at Moody’s Investors Service.

Of the top 10 U.S. ports analyzed by Market Intelligence, only two recorded year-over-year declines in seaborne shipments: the ports in Mobile, Ala., and Seattle. The remaining eight ports booked increased second-quarter shipments compared to the same quarter of 2020.

Coal shipments from New Orleans, which exports a significant amount of Illinois Basin coal, surged in the second quarter to 2.8 million tonnes, 398.5% more than in the same quarter in 2020.

“With coal prices up, a lot of Illinois Basin coal production can now be reasonably exported again,” Nelson told Market Intelligence. “That helps explain why exports from New Orleans’ ports were up so much during the quarter. It’s a function of where that coal is coming from and what is going on there.”

A significant portion of the country’s metallurgical coal, a primary ingredient in steelmaking, departed from Norfolk, Va., during the three-month period. Producers shipped about 6.2 million tonnes of metallurgical coal from Norfolk, a 31.7% increase from the 4.7 million tonnes of metallurgical coal exported during the second quarter of 2020.

Total coal export volumes from Baltimore also jumped during the June quarter, by 101.5% year over year to total 5.1 million tonnes. Producers in Northern and Central Appalachia service ports in Baltimore and Norfolk.

Help from China

As domestic demand for U.S. thermal coal wanes, several major coal operators have their eyes on supplying international markets. Coal companies shipped an average of 12.1 million tonnes of coal from the U.S. during each week of June, about 47% more than in June 2020, according to a Market Intelligence report by analyst Steve Piper.

U.S. coal exports could reach 90 million tons by the end of 2021, an increase of approximately 30% from 2020, according to the U.S. Energy Information Administration’s Aug. 10 short-term energy outlook.

“High global steel prices are driving these increases in coal exports, and trade tensions between China and Australia continue to support U.S. thermal coal exports,” the report stated.

The U.S. saw a boom in coal demand from China at the end of 2020 after an unofficial ban on Australian coal imports pressured buyers to turn to comparable sources. U.S. exports of coal to China spiked 251.8% year over year in the final three months of 2020.

Pennsylvania-based Consol Energy Inc.’s total coal shipments soared during the second quarter, increasing to 5.9 million tonnes, from 2.3 million tonnes during the year-ago quarter, on the back of strong demand from seaborne markets, according to the company.

“We continue to focus on our strategy of further reducing our exposure to a declining U.S. coal market for power generation with a heightened focus on increasing our industrial business,” Consol Energy CEO and President James Brock said during an Aug. 3 earnings call. “We have seen sustained improvements in the seaborne thermal coal market since the end of the third quarter of 2020.”

British Columbia-based Teck Resources Ltd. said the favorable price environment for exports of coal to China boosted the company’s second-quarter earnings. Of the 6.2 million tonnes of steelmaking coal sold during the June quarter, about 2 million tonnes went to China “at significantly higher prices than FOB Australia prices,” the company stated in its earnings report.

“We will continue to prioritize available spot sales volumes to China, which is expected to continue to result in favorable price realization,” CEO and President Donald Lindsay said during a July 27 earnings call.

The U.S. thermal coal sector will continue its structural decline in 2022, according to Nelson. Although coal export volumes are likely to grow in 2022, domestic consumption of coal will ultimately fall more than exports will rise.

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