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Coal Play

Will China buy American coal?

Rob Schmitz Dec 18, 2013
Coal Play

Will China buy American coal?

Rob Schmitz Dec 18, 2013

China burns 3.5 billion tons of coal a year, as much as the rest of the world combined. Here in the mountains of Shanxi Province is where much of it comes from. Red coal trucks the size of armored vehicles rumble through the toxic sulfur smog blanketing China’s coal country. Coal continues to move out of Shanxi to China’s rapidly growing coast at a steady pace, but the industry is in flux.

Coal prices are at historic lows, pollution from burning coal at historic highs. State-owned coal companies are spending more cleaning up their mines, making them safer, and there’s little money left for miners.

“We make a fraction of the salary we made a couple of years ago, and that’s if we get it at all,” complains coal miner Ma Huiming.

Ma says his company, Yangmei Group, owes him and others here in the mining town of Majiapo three months of unpaid wages. His neighbor, Ma Yingfei, says there’s another reason behind the hard times in China’s coal country.

“So many power plants on China’s coast are now importing coal from foreign countries instead of buying our coal,” he mutters.

Ma Huiming works at a coal mine near his village of Majiapo in Shanxi province. He says his employer, Yangmei Group, owes workers three months of unpaid wages. Credit: Rob Schmitz/Marketplace

The reason boils down to simple economics.

“Because we lack the infrastructure here, moving coal from China’s mountains to its coast by rail or by truck is actually more expensive than shipping coal from foreign countries,” says Hu Xiaoyong, who works on mergers and acquisitions for government-owned coal companies in Shanxi’s capital city of Taiyuan. “That’s why China’s big coastal cities are abandoning Shanxi coal.”

Coal imports to China are up 20 percent over last year. Most of that coal arrives on ships from Australia and Indonesia. And perhaps someday, from the U.S.  Proposed terminals in the Pacific Northwest could export more than 100 million tons of coal a year to China.

“China consumes 3 billion tons of coal a year, and so if you’re looking at a port of a little over a hundred million tons, you’re talking about less than a percent. It would be a really small change to the coal mix,” says Susannah Kroeber, an energy analyst at J-capital in Beijing.

She says 100 million tons of American coal a year would be a drop in the bucket for China. Kroeber thinks China would buy it, ironically, for environmental reasons. Coal from Montana’s Powder River Basin, which would be burned at power plants, produces less sulfur emissions than much of China’s domestic coal. Though China’s investing billions in renewable energy, Kroeber says the sheer number of Chinese entering the middle class and using more electricity than ever means coal is going to stick around for a while.

“China’s going to burn coal,” Kroeber says. “They don’t really have an option. So if your options are replacing worse coal with better coal, then that’s probably a good tradeoff.”

But for the environment, it’s not an ideal tradeoff. Wang Tao, a climate expert at the Carnegie-Tsinghua center for Global Policy, says coal consumption in China will continue to grow. The China National Coal Association predicts the country will burn 4.8 billion tons of coal by 2020, a more than 70 percent increase from what China burns today. That will  make China an attractive market for U.S. and Australian imports, both of which are low-sulfur.

But it could prevent China from fully developing its potential for renewables.

“There could be the scenario that the coal price from the U.S. is so cheap that it makes coal-fired power plants more competitive and squeeze out space for renewables or hydropower, so this is a side effect that we have to consider,” says Wang.

A coal truck drives by the stream that runs through the mining town of Majiapo, in Shanxi province. The waterway, polluted by chemicals from Yangmei Group’s coal mine upriver, is the main source of drinking water for the village. Credit: Rob Schmitz/Marketplace

In that scenario, China, currently hooked on low quality coal, becomes addicted to cleaner-burning coal and then shuts out cleaner energy solutions.

Whether it’s imported coal or renewable energy, villagers in Majiapu hope something replaces the dirty coal being mined from their mountains. Ma Huiming looks in disgust at the stream running by his home that provides the village with its drinking water.

It’s turned bright orange.

“The mining company discharges all its wastewater into this stream and now look at it — it’s all poisoned,” screams Ma. “The dust from the mine has turned the cabbage in the fields pitch black. Who pays for the cost of all this pollution? We do!”

Ma says the way things are now, he’d be happy to lose his salary at the coal mine and make less as a farmer if it meant his children could drink clean water and breathe clean air. But beyond the mountains of Shanxi, the world’s largest metropolises continue to grow – and so does their hunger for coal.

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