War On Coal

Updates

Later, 6:15 pm: shortly after posting the notes below, Don sent me a link to a story that validates what is written below. It's not a war on coal in this country, it's a war on coal-using power plants. The US coal industry, railroads, and ports will simply ship US coal at fire-sale prices to the rest of the world.  

Original Post

This is a fascinating piece of work. 

Motley Fool is reporting:

What's interesting is that with the push-back from several West Coast locales to not allow coal export facilities to be built, it's really consolidating the coal market around a few select cities. In fact, five customs districts accounted for 90% of March U.S. coal exports (coal exports in tons/year):

• Norfolk, VA (6.1)
• New Orleans (2.2)
• Baltimore (2.1)
• Mobile, AL (1.4)
• Houston-Galveston, TX (0.5)

Norfolk:

The Norfolk area is home to coal-terminal operator Dominion Terminal Associates, among others. The facility is jointly owned by Peabody Energy, Arch Coal, and Alpha Natural Resources, which use it to ship coal around the world. It's a state-of-the-art facility that features many environmental safeguards to keep the 1.7 million net tons of coal storage capacity from causing any environmental damage. 

Overall, coal exports provide significant economic benefits to Norfolk as well as the state of Virginia as a whole. It's estimated that coal exports contributed to more than 19,000 jobs to the state and added $2.5 billion in related economic value.

Read about the rest at the link.

Will the fact that the west coast is shutting down coal exports affect the US coal export business? Hardly.

From wiki:

The Panama Canal expansion project (also called the Third Set of Locks Project) will double the capacity of the Panama Canal by 2015 by creating a new lane of traffic and allowing more and larger ships to transit.
The project will:

• Build two new locks, one each on the Atlantic and Pacific sides. Each will have three chambers with water-saving basins.
• Excavate new channels to the new locks.
• Widen and deepen existing channels.
• Raise Gatun Lake's maximum operating level.

 NPR also reports:

When the project to widen the canal is completed in 2015, longer and wider ships will be able to pass through its locks, giving them access to ports on the Gulf of Mexico and the East Coast. But at the moment, the Port of Baltimore is one of only two on the East Coast (the other is the Port of Virginia in Norfolk) that can handle the large cargo ships, known as post-Panamax ships. It recently completed a major expansion, which included building a 50-foot berth and dredging the channel.

Mark Montgomery, the president of Ports America Chesapeake, says much rides on the canal's expansion.

"It will allow a ship that is three times as big to come through the canal once the widening project is finished," he says. "It's a significant change in maritime economics."

Bigger ships mean more cargo containers, which can translate into an economic windfall for a port, says Adie Tomer, a transportation and infrastructure specialist at the Brookings Institution.

Even the NY Times seems to be excited to see all that American coal being shipped to countries where there will be less concern for all the "clean coal" technology:

The $5.25 billion project, scheduled for completion in 2014, is the first expansion in the history of the century-old shortcut between the Atlantic and Pacific. By allowing much bigger container ships and other cargo vessels to easily reach the Eastern United States, it will alter patterns of trade and put pressure on East and Gulf Coast ports like Savannah, Ga., and New Orleans to deepen harbors and expand cargo-handling facilities.

Right now, with its two lanes of locks that can handle ships up to 965 feet long and 106 feet wide — a size known as Panamax — the canal operates at or near its capacity of about 35 ships a day. During much of the year, that can mean dozens of ships are moored off each coast, waiting a day or longer to enter the canal.

The new third set of locks will help eliminate some of those backlogs, by adding perhaps 15 passages to the daily total. More important, the locks will be able to handle “New Panamax” ships — 25 percent longer, 50 percent wider and, with a deeper draft as well, able to carry two or three times the cargo.

No one can predict the full impact of the expansion. But for starters, it should mean faster and cheaper shipping of some goods between the United States and Asia.

With the US declaring "war on coal" our trading partners will be able to snap up coal at fire-sale prices.

For investors only: I don't invest in coal, and don't plan to, but there might be some opportunities here. One may want to look at Arch, Peabody, Alpha Natural Resources, and ask the question whether they may be oversold. Two of the companies pay a dividend.

The other big winners, possibly, will be the eastern US railroads. As the west coast shuts down coal exports, exporters will move coal to the east coast. 

Disclaimer: this is not an investment site. Do not make any investment decisions based on anything you read here or think you might have read here.