Politics Blog

At Australian energy conference, talk of coal’s rebound

Even as SSA Marine and its supporters continue to fight vigorously to get a coal terminal built at Cherry Point — through a public relations push and responses to Lummi Nation’s request to kill the Gateway Pacific Terminal project — the headlines about coal indicate the climate-change inducing fossil fuel doesn’t have much of a future.

Officials at SSA Marine will tell you that Gateway Pacific Terminal is not a coal terminal, but it is designed to ship 48 million metric tons of coal a year versus 6 million tons of other commodities. SSA Marine already has an agreement with Peabody Energy to ship 24 million tons of coal a year. (As Peabody waits for GPT to be built, it is reeling from its own report, earlier this week, that it suffered more than $1 billion in losses in the second quarter of 2015.)

Search “coal exports” in Google News and this is typical of the headlines that pop up:

Indonesia Coal Exports Suffer Most as Chinese Demand Falls.” (Bloomberg)

The price of thermal coal — the kind used to fire electricity-generating power plants — remains in the tank after peaking in 2011. China has agreed to cap its carbon emissions long-term, and in the short term it seeks to clean its air and support domestic mines by exporting less coal.

Organizations such as the Institute for Energy Economics and Financial Analysis (IEEFA) are predicting coal’s demise, as one of its analysts told a crowd of environmentalists November 2014 in Bellingham. The IEEFA participated at the biennial Resources and Energy Investment Conference in Sydney this week, which got a good treatment from the Sydney Morning Herald.

One IEEFA official told his Australian audience coal is “dead, or at least in permanent structural decline,” the same message the Institute’s Tom Sanzillo gave Bellingham last fall.

The IEEFA speaker in Australia, Tim Buckley, noted that coal burning by a major Chinese energy company has already started declining, and that India — “often held up as Australia’s coal saviour,” according to the Sydney Morning Herald article — will cease coal exports by 2021.

One voice, however, remains consistently bullish about coal, at least down the road a few years. The Bellingham Herald contacted Wood Mackenzie in November, to offer counterpoint to Sanzillo’s analysis of coal’s prospects.

“It’s challenging to grow (export) volumes materially from here, but should global demand grow, there’s a home for (Wyoming and Montana coal),” said Joe Aldina, a commodities research analyst with Wood Mackenzie, in November. The firm anticipated at the time that coal imports internationally would increase threefold by 2035. “Indonesian coal may not be able to supply what the global market demands in the long term.”

Eight months later, at the conference in Australia, Wood Mackenzie remained optimistic. Robin Griffin of Wood Mackenzie said this week that coal prices were expected to rebound starting next year, and the supply and demand curves would reach a balance around 2022.

If Gateway Pacific Terminal gets built — and Lummi Nation will have a lot to say about that — then it wouldn’t be up and running until 2019 at the earliest, more likely later.

It could be online just in time to catch coal’s next wave.

Unless the folks at IEEFA are right.

Who might have the inside track on the correct forecast of coal’s future? The IEEFA is working to reduce the world’s dependence on fossil fuels. Wood Mackenzie claims to be more pure in its objectivity.

“No one can predict with certainty how markets will function over the long run,” Gateway Pacific Terminal spokesman Craig Cole told The Bellingham Herald in November, on the occasion of IEEFA’s visit to Bellingham.

“The big consultancies like Wood Mackenzie make a living by providing economic sector analyses to clients. They aren’t really selling a position. If they don’t get their analytics and forecasts right, they lose credibility and clients.”