The Conversation (0)
The US is pushing to block coal exports as Japan and India compete for supply.
Things may be getting slightly easier for coal market players in the US.
Lately, American coal sector participants have been worried about new rules from the Environmental Protection Agency (EPA). These rules would essentially prohibit new coal-fired electrical plants that use current technology.
However, people privy to EPA discussions told The Wall Street Journal that the agency may alter the rules. Lawmakers are reportedly concerned that the current legislation may be challenged in court, which could delay implementation for years.
Sources said that the changes could mean laws won’t be ready for the April 13 deadline, when the matter was supposed to be finalized.
At the same time, some US politicians are calling for more coal rules, specifically regarding coal exports.
Democratic governors John Kitzhaber of Oregon and Jay Inslee of Washington want the government to consider denying permits for Pacific coal export terminals, according to Bloomberg.
In a letter to the White House Council of Environmental Quality, the governors said that a federal review of the export facilities must look not only at local environmental impacts, but also at the greenhouse gas effects of American coal burned for power in places like Asia.
That’s certainly the place to watch, as Asian demand continues to eat up slack in the global thermal coal market.
Indian coal imports up
India’s coal imports jumped 35 percent year-on-year during February, according to New Delhi shipping firm Interocean, as quoted by Bloomberg.
The nation imported 12.6 million metric tons (MT) of coal, up from 9.34 million MT during February 2012.
The majority — 10.3 million MT — was thermal coal.
Indian coal buyers shopped close to home, with the largest import sources being Indonesia (9.2 million MT), Australia (1.52 million MT) and South Africa (1.45 million MT).
US shipments accounted for just under 325,000 MT.
Mongolia seeks rail line partner
Mongolia is hoping to sell more coal to India’s rival buyer, China. The Mongolian government is looking for a private-sector partner to develop a rail line from the giant Tavan Tolgoi coal field to the Chinese border, according to state news agency Montsame, as per Bloomberg.
Twenty companies — including 14 foreign firms — have reportedly submitted bids to take a 49-percent interest in the rail project.
The cost of the railway is unclear, but the Development Bank of Mongolia will reportedly contribute at least $200 million to the project.
The Tavan Tolgoi coal field hosts 6.4 billion MT of reserves, most of which is coking coal.
Japanese coal consumption set to rise
Japan will be looking for new coal supplies in the near future. The Asian nation is expected to dramatically increase its coal consumption over the coming years, according to Reuters.
Japan’s top six utilities will up their coal usage by 24 percent in the fiscal year starting April 1, reported the news source. Coal will make up 20 percent of overall Japanese fuel demand in the coming year. That’s up from 16.3 percent in 2012.
The move comes as a weakening yen makes fuel imports expensive for Japanese buyers. Coal is seen as a cheaper power generation alternative to oil and liquefied natural gas.
Company news
Mongolian coal producer SouthGobi Resources (TSX:SGQ,HKEX:1878) has resumed output of semi-soft coking coal from its Ovoot Tolgoi mine.
The mine had been shut since June 2012 on the back of political uncertainty.
The company said it will resume operations in a “conservative and therefore cost effective” manner. Production for the remainder of 2013 is forecast at 3.2 million MT.
Homeland Energy Group (TSX:HEG) is getting out of the South African coal sector.
The company is selling two coal mines in the country for gross proceeds of $37 million, according to The Economic Times.
The company is majority owned by India’s GMR Energy. That company has spent $80 million on Homeland’s coal mining operations with the goal of securing fuel for its Indian power projects.
But the two South African mines have yet to become operational.
Homeland will reportedly sell some of the assets to Mbuyelo Group and Joe Singh Group. Around $25 million of the proceeds will go toward paying off debt.
Cardero Resource (TSX:CDU,AMEX:CDY) is nailing down transportation infrastructure for one of Canada’s newest coal mines.
The company signed an LOI with Canadian Forest Products to charter barge services for coal from its Carbon Creek project in British Columbia.
The merchant barge will be the project’s main source of transport until Cardero builds its own tug-and-barge fleet. The company is currently tendering for engineering firms to build the fleet, with commissioning expected in late 2015.
The company also said it has signed a separate LOI for the lease of an industrial facility at Mackenzie, British Columbia. It will be developed as a coal loading facility.
On the financing side, American coal developer Corsa Coal (TSXV:CSO) announced $40 million worth of transactions with Quintana Energy Partners.
That includes a $10.2-million convertible note plus $30 million in equity financing. Corsa will issue up to 366.9 million shares as part of the transaction. The deal is being completed at a price of $0.17 per share, a significant premium to the company’s current share price of $0.10.
Proceeds will be used for working capital and to pay off $25 million in debt with Sprott Lending.
Securities Disclosure: I, Dave Forest, do not hold equity interest in any companies mentioned in this article.