Chart of the Day: Coal Converges on Asia

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Published on Monday, 02 July 2012 08:00

Written by Adam English, Associate Editor, Inside Investing Daily

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Solar, wind, natural gas and any source of energy you can think of don't hold a candle to coal. It isn't called King Coal for nothing...and it will not be dethroned.

From 2001 through 2011, global consumption of coal rose an astonishing 56%. Consumption in Asia and developing nations is driving the growth.

India and China, with their outsized populations and insatiable growth rates, are the markets that coal exports will continue to converge on for years to come.

It shouldn't come as a surprise American coal consumption has been on the decline for quite some time. Cheap natural gas and hefty pollution control costs have displaced coal as the cheapest source of power.

2011 was a particularly big year for U.S. coal exports -- they were 31% higher than in 2010. A large portion of the coal is still being exported from eastern ports to Europe.

Most of that coal is destined for steel production, and Europe isn't about to see much growth in manufactured goods for a while.

That leaves Asia as the prime target for expanding U.S. exports. Ports in Washington and Oregon are the obvious solution, but expansions are needed. If applications are approved, it will take at least a couple of years to increase export capacity.

Of course, the U.S. isn't the only country with export growth potential. Australia, Indonesia and Mongolia export massive amounts of coal to China already.

Australia and Indonesia already have robust export systems in place. Mongolia is now moving to build an $800 million railway to double coal export capacity and halve the transport time. The project should be completed in 2015.

Prices may be down while the global economy staggers, but a lot of change is in the works for coal.

King Coal is growing and will continue to create healthy revenues for railroads, miners and shipping companies. The only question left is how much business U.S. companies will be able to grab.

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