The ongoing trade tensions between the United States and China have taken a toll on the U.S. coal industry, with new reports indicating that China has ceased imports of American coal. This halt has contributed significantly to a 14% decline in U.S. coal exports during the current year, according to the U.S. Energy Information Administration (EIA).
In a meeting this week, President Donald Trump and Chinese leader Xi Jinping discussed potential trade progress, yet it remains unclear if this will positively impact the coal sector. Analysts, including Seth Feaster from the Institute for Energy Economics and Financial Analysis, expressed uncertainty about whether negotiations would result in increased exports of coal and soybeans to China.
The Trump administration has undertaken initiatives to support the domestic coal industry, including regulatory rollbacks and increased access to federal lands for mining. Interior Department spokesperson Charlotte Taylor stated that these efforts aim to ensure energy stability and economic strength in the U.S. Recent government actions also included reducing royalty rates for coal extracted from federal lands and a commitment of $625 million in September to enhance coal power generation.
Despite these measures, recent coal lease sales in Montana, Wyoming, and Utah have not attracted acceptable bids, raising questions about the effectiveness of the administration’s support for the industry. While U.S. coal production has risen by approximately 6% this year, this increase is largely attributed to higher natural gas prices rather than government policies.
The EIA’s report, released on October 7, 2023, noted that coal exports decreased by 14% from January through September compared to the previous year. This decline correlates with heightened tariffs imposed by China, which included a 15% tariff on U.S. coal in February and a reciprocal 34% tariff on imports from the U.S. in April.
While the U.S. exports around one-fifth of its coal production, China has not been a primary market, accounting for only about 10% of U.S. coal exports. However, its decision to stop importing U.S. coal has had a disproportionate impact, according to coal analyst Andy Blumenfeld from McCloskey by OPIS. Last year, nearly three-quarters of U.S. coal exported to China consisted of metallurgical coal, primarily used in steelmaking, while the remainder was thermal coal used for electricity generation.
The majority of metallurgical coal is sourced from Appalachia, whereas thermal coal is largely mined in the expansive open-pit operations of the Powder River Basin in Wyoming and Montana. A revival of U.S. coal exports to China could significantly benefit Appalachia, as noted by Blumenfeld. He expressed cautious optimism, stating, “There is optimism. But there is little documentation to back that up right now.”
Most coal shipments to China last year originated from the port of Baltimore, with additional exports routed through Norfolk, Virginia, and the Gulf of Mexico. The export of thermal coal from the Western U.S. remains limited due to the high costs associated with rail transport to West Coast ports, coupled with local political resistance to expanding coal export facilities.
As the trade situation continues to evolve, the fate of U.S. coal exports hinges on the broader trade negotiations with China, raising critical questions about the industry’s future amidst shifting global energy demands.
