A column by Jared Hunt, business editor of the Charleston Daily Mail
CHARLESTON, W.Va. — In addition to competition from natural gas and the looming effects of proposed environmental regulations, Central Appalachian steam coal has another factor working against it right now: international competition.
But this competition isn’t taking place in foreign markets, it’s happening right in the region’s backyard.
The Wall Street Journal reported last week that while coal mines across Central Appalachia are announcing closures, U.S. coal imports are rising sharply.
The paper reported coal imports have surged during the first six months this year to 5.4 million metric tons, up 44 percent from the first half of 2013. Two-thirds of that coal came from Colombia, which has increased production this year, exporting 24 percent more coal during the first five months of the year, according to Global Trade Information Services.
The coal is being used to supply power plants in Florida and along the Gulf Coast.
Why are the U.S. companies using more Colombian coal instead of Appalachian coal? Price.
According to research firm IHS Energy, the U.S. plants have been buying Colombian Coal for about $75 to $82 a ton for most of the year. That compares to the $79 to $86 a ton they are being quoted by Central Appalachian producers.
The Journal reported it’s $11 a ton cheaper for Florida power plants to have coal shipped from Colombia than Central Appalachia. It costs $26 a ton to ship from Central Appalachia compared to $15 a ton from Colombia.
It may seem counterintuitive that shipping from farther away costs less, but the savings come from how it’s shipped.
Columbian coal is transported on ships that can carry up to 50,000 tons at a time, while Central Appalachian coal is shipped by train, which have about 100 railcars shipping about 100 tons of coal each…