China’s appetite for coal won’t be affected by the availability of a Whatcom County shipping terminal, according to some industry analysts.
Gateway Pacific Terminal spokesman Craig Cole came up with a couple of reports to that effect, responding to yesterday’s post quoting economist Thomas Power, saying the opposite: As Power sees it, West Coast coal export terminals, at Cherry Point or elsewhere, will make coal cheaper in China and thereby encourage the Chinese to use more of it.
Cole countered with this report in Crosscut, in which author and attorney Daniel Jack Chasen cites some evidence that the only issue is where China will get its coal, not how much coal China will burn.
Chasen’s article dovetails, to some extent, with my earlier post highlighting reports by Richard Morse of Stanford University. Among other things, Morse says China is importing more coal mostly because it is the cheapest way to get that coal to China’s coastal cities–not because Chinese coal demand is outstripping domestic Chinese production. China’s problem, Morse says, is lack of rail capacity to get coal from mines to coast.
If China can fix that problem, or if the price of imported coal on world markets rises too high, China’s supposedly “insatiable appetite” for imported coal could go away as quickly as it materialized.
Morse is also quoted in this report from the Minegolia site, apparently originating in the Trading Markets newsletter, stating: “By importing U.S. coal, China is not changing the amount of coal that it burns. I understand why on an emotional level people don’t like it. But if you actually understand the economics, and you understand how climate change works, it’s a non-issue.”
This whole article is well worth a read. It notes that Peabody Energy (stock symbol BTU) is already a major player in international coal shipments, and will ship a lot of coal to China from a variety of origins no matter what happens in Whatcom County.
“The company has already plunged $2 billion into Australian mining operations to supply Asia and has a coal trading business with offices in Beijing, Singapore, London and Jakarta, Indonesia. It is studying joint ventures in Mongolia and China, discussing long-term supply agreements with India’s state-owned coal company and pursuing projects and partners in Indonesia.”
The report also makes it clear that blocking new coal ports in Whatcom County, and elsewhere along the West Coast, is a high priority for the Sierra Club and other environmental groups.
““We plan, with the strong Democratic states of California, Oregon and Washington, to put up a wall to (coal export terminal) efforts,” said Bruce Nilles, who heads the Sierra Club’s Beyond Coal campaign in Washington.
This is the kind of issue where both sides are going to have plenty of expert analysis all photocopied and ready for handout. But maybe the question of Chinese coal-burning behavior is simpler than it sounds. Maybe it’s not an either-or situation.
It seems obvious that China is going to burn a lot of coal no matter what happens in Whatcom County. It also seems obvious that they would burn Rocky Mountain coal, shipped out of Gateway Pacific Terminal, as long as it makes economic sense for them to do so, and not one minute longer.
If the Whatcom County terminal ever reaches maximum envisioned capacity of around 50 million tons per year, it seems doubtful that this would mean a net increase of 50 million tons burned in China. But if that terminal does enable China to acquire coal more cheaply than would otherwise be the case, doesn’t that stimulate Chinese use of coal to some extent? When fuel is cheap, investments in fuel efficiency are less likely to pencil out, as are alternative energy sources.