U.S. utilities turning to Russia, Colombia to fulfill coal needs

By Fred Pace

August 6, 2014

U.S. utilities are importing more coal from countries like Colombia, Russia and Indonesia in 2014 to hedge against poor railroad service, fulfill unique blends and, in an alarming trend for Central Appalachia coal producers, because it is less expensive than burning domestic coal, according to a report by SNL Energy.

The U.S. imported 1.23 million tonnes of thermal coal in the first quarter, according to SNL Energy data sourced from the U.S. Department of Commerce, Bureau of the Census, up 73.1 percent compared to the year-ago quarter. April and May coal imports also topped totals from a year ago.

Southern Co. increased its purchases of Colombian coal by nearly 500,000 tons in the first half of the year, a spokeswoman for the utility said. According to SNL Energy fuel delivery data through April, the utility purchased Colombian coal for subsidiary Alabama Power Co.’s Barry, Gorgas and Greene County coal-fired plants. The Greene County plant is co-owned by Southern subsidiary Mississippi Power Co. Most of the Colombian coal is purchased from Drummond International LLC, a unit of Alabama-based Drummond Co. Inc.

“The primary driver for the increased purchase of Colombian coal was in order to provide the most cost-effective fuel for our customers,” the Southern spokeswoman said, noting that Southern purchased more than 12 million tons of spot coal in the first half of 2014.

As recently as 2010, it was not uncommon for the U.S. to import more than 1 million tonnes of coal per month. But natural gas prices dropped, coal demand declined and fewer domestic utilities sourced coal from the international market. In 2010, the U.S. imported 12.63 million tonnes of bituminous coal. Three years later, that number fell to 5.04 million.

But coal imports are on the rise again. UBS Securities LLC analyst Kuni Chen noted that the amount of imported coal in 2014 is up off a small base in 2013, triggering what he called “kind of shocking” percentage increases. Still, the increase is evidence of unreliable rail service and weak Atlantic Basin coal prices, Chen said in a phone interview.

The rail issues date back to late 2013, when the confluence of a cold winter and network growth among several commodities significantly hindered velocity on the rails. Peabody Energy Corp. Chairman and CEO Gregory Boyce said July 22 that southern Powder River Basin coal shipments alone declined an estimated 15 million tons during the first half due to poor rail performance. Both Western railroad BNSF Railway Co. and Eastern carrier CSX Corp. have recently acknowledged continued struggles with rail service.

“Colombia coal is low on the cost curve and the transport of Colombia coal to the Southeast U.S., for instance, is not particularly high,” Chen said. “That coal is competitively priced against Central App. My understanding is that those imports are used by utilities that are right on the water, so there’s no transport inland once it gets to the dock. So, a niche group of utilities can take advantage of that type of coal. There are probably some rail service issues playing a role there, as well.”

Indeed, the majority of utilities taking imported coal are on the coast. Robert Peek, the director and general manager of business development at the Jacksonville Port Authority, known as JAXPORT, said in a phone interview that Jacksonville, Fla., utility JEA, for example, operates its own small coal import terminal. JEA has long purchased coal from Colombia.

Keep reading the full report here:

(Fred Pace is the Editor for the Coal Valley News. He can be contacted at or at 304-369-1165, or on Twitter @fcpace62)