Archive for Coal

Coal Industry Seeks Unusual Partner in the UN Green Climate Fund for poorer nations’ energy needs

If you cannot beat them, try to join them… …in order to help the poor nations achieve desperately needed energy supply.

Yes, from environmentally harmful coal.

The coal industry, viewed as a key contributor to global warming, is seeking a once-improbable collaborator They are trying to work with a fund set up under United Nations climate negotiations.

With more than 2,000 new coal power stations planned or being built in Asia to Africa, the UN Green Climate Fund should help finance making the plants more efficient, according to Mick Buffier, the chairman of the World Coal Association.

New coal technology can cut climate-warming gases by about a third per unit of power, though it adds about 50 percent to the $315 million cost of a 500-megawatt plant in China, the group said.

The Green Climate Fund is meant to channel climate-related aid from industrial nations to developing countries. Bangladesh alone said it needs $16.5 billion in the 20 years through 2030 to ensure its plants will use so-called “super-critical” clean technology.

At the same time, older funding sources like Citigroup Inc. announced on Monday that it will cut back on financing for coal projects.

To read the entire article, go to bloom.bg/1N1eoA3

Coal as energy for US electric power continues drop // Once 50% — now 40%

 

The U.S. Energy Information Administration (EIA) agency reports in September 2015 that the number of new coal mines opening each year dropped to its lowest point in at least a decade.

The total number of operating coal mines in the U.S. has hit its lowest point since all the way back to 1923.

US coal producers opened 103 new mines in 2013. At the same time at least 270 operations were either halted or shut down in 2013 according to the agency.

The 2013 production by the fewer the operating mines (just over 1,000 mines) dropped to less than 1 billion short tons.

The total coal production in the United States has shrunk about 15% since 2008.

“The commodity, which once fired half of the country’s power now accounts for just under 40% of it.”

Over the long run, the Energy Department projects that percentage will drop towards about one-third (34%) within the next 25 years.

“Coal is clearly trending down as market share as thermal power plants turn to natural gas and some displacement by renewables like wind and solar power.”

 

Maybe as many as 15 Years of Weak Crude and other energy prices

“WHAT IF:

What if the world is shifting from an “investment phase” of a 30-year commodity cycle to an “exploitation phase?” 

How does this professional assessment of future markets cause you as a railroad or freight carrier to change from Plan A to maybe Plan B or even Plan D?

 

From Bloomberg, Sep 17, 2015

A glut of crude may keep oil prices low for the next 15 years, according to Goldman Sachs Group Inc. That is a very long period.

This strategic commodities report cites in part Jeffrey Currie in an interview at Lake Louise, Alberta.

Goldman’s long-term forecast for crude is at $50 a barrel, he said. He also observed that “the risks are to the downside given what’s happening in the other commodity markets and the macro markets more broadly.”

Lower iron ore, copper and steel prices as well oil and natural gas –PLUS weaker currencies in commodity-producing countries — have reduced costs for oil companies, according to Currie.

The world is shifting from an “investment phase” of a 30-year commodity cycle to an “exploitation phase,” with shale fields as an important source of output, he said.

To read the entire article, go to http://bloom.bg/1JcGYJu

Vale appears to be exiting Australian coal market

Part of a new strategic plan for Vale?

Reports are that Vale has sold its Integra coal mine in Australia to Glencore and Bloomfield.
The Integra coal mine complex is located in New South Wales’ Hunter Valley. This coal complex has been on “care and maintenance” for about a year. Vale decided the operation was not economically viable.

Last month Vale month’s sold its Issac Plains met and thermal mines to Stanmore Coal.  Reports were that this transaction was at One Dollar for the project valued at $613 million three years earlier.

Mining.com reports that the divestment of Isaac Plains and the sale of Integra Coal has led to a 7.2% reduction in Vale’s total coal output.

Now, about 65% of the miner’s coal output will be generated by Vale’s Moatize project in Mozambique.

Bloomberg Commodities Index hits a year 2002 low

The Bloomberg Commodity Index, a basket of 22 raw materials including crude and gold is trading at a 2002 low.

It has slumped 14 percent this year.

To read the entire article, go to http://bloom.bg/1TRmDVF

Clearly more bad news for global rail to port new projects.

Sent from my iPhone

South Africa electric utility dispute with major coal supplier

The dysfunctional issues surrounding the government managed electric utility threatens the so called National Development Plan.

Here is the latest business news from multiple sources. News reports suggest that South Africa’s ailing mining sector has already shed more than 35,000 jobs over the past two years.

Mining company’s complain of the rising costs, particularly for electricity and wages.

Tonight, mining giant Glencore announced that it is placing its Optimum coal operation under “business rescue” due to Eskom’s unreasonable supply contracts. Optimum previously contracted to supply 5.5 million metric tonnes of coal per year to Eskom. ”

Glencore claims that “This has resulted in it supplying the coal at a price significantly below the cost of production for a number of years”.

Meanwhile, South African coal prices for exported coal have reportedly dropped 23 per cent over the past year due to a global glut of the fuel. Eskom is therefore looking to renegotiate the rate it pays for domestic coal.

All of the coal is mostly moved by rail.

Railway Renaissance! Maybe not as challenges come from re-sourcing thermal coal

As a Middle Ages historian in college, I can tell you that the Renaissance period had its ups and downs.

The modern North American so called Renaissance Rail Freight Period has challenges also. Loss of potential thermal coal traffic market share is one such challenge.

Next time you are at a rail conference, look for a due diligence balance in the railway future discussion.

Renaissance Challenge #1 is to rail thermal coal markets and routes… The Bloomberg news has an excellent report on the changes coming in the U.S. Coal by rail market. Here are a few highlights:

“Coal Left Fighting Over America’s Last Plants as Rules Mount” — a report by Tim Loh and Mario Parker – Aug 2, 2015

One theory is that various states will fight to Steal Markets from one another & therefore rail coal train corridors could significantly change. We saw such massive rail routes changes in the 1970’s to 1990’s period as the Powder River traffic literally exploded as a new rail market.

Now comes a new cycle fight. One example is the fight for resourcing origin markets between the Illinois Basin producers and the Wyoming Powder River area. Illinois miners may try to “take 60 million tons of Powder River Basin’s market” says one source, Robert Moore, CEO Foresight Energy LP in St. Louis.

This geographic resourcing is particularly interesting since the rail regulators at the STB in ashington typically ignore source competition as an economic variable.

Amidst this, the pending Clean Power Plan rules will seek to cut coal-fired electricity by 90 gigawatts. The Energy Information Administration reported earlier that this cut would come out of about 292 gigawatts of coal-fired generation capacity that was in line during in 2014.

New replacement thermal coal power station in the next decade or two? Unlikely.

The railroads will therefore fight for a diminishing share of the coal energy market over possibly much shorter average lengths of haul as states fight for resourcing.

No one knows how this will play out even if there is a Rail Renaissance under way.

What is the calculated financial risk impact on the big 6 North American rail companies from such new sourcing + route shifting + power station energy changes?

To read the entire Bloomberg article and its authors’ story focus, go to http://bloom.bg/1N2BchP

US revised 2015 Climate Rules will hit railroads hard as soon as 7 years…by 2022

An important Coal background report from Bloomberg, Aug 1, 2015

The Obama administration has reduce the differences among state goals in a landmark climate change rule, addressing complaints from states such as Arizona and Florida… Selectively, this add further pressure to the long term profitability issues senior railroad managers face.

Rail freight commodity mix is going to change significantly as a result.

This is a good topic for upcoming U.S. Railroad forums and possible marketing lessons for students seeking to enter the rail industry.

A few Highlights:

According to Bloomberg sources, the new rules from the Environmental Protection Agency will force cuts in greenhouse gases from power plants. It is to be the centerpiece of President Barack Obama’s plan to address global warming.

US power plants burning coal produce almost 40 percent of the United States electricity, and release the most carbon dioxide for every kilowatt generated.

Each state will have to submit plans to the agency by 2018 on how it will achieve the EPA-mandated goal, which begin to bite in 2022 and phase in through 2030.

Coal-Heavy States

The EPA’s initial proposal would have forced states like Arizona, which have a lot of natural-gas plants and scope for renewable power growth, to make cuts in emissions of more than 50 percent by 2030. …the coal-heavy states such as Kentucky, West Virginia, Wyoming and Montana faced cuts of 21 percent or less.

Under the scheduled new rules, EPA is tweaking its forecasts for the amount of natural gas and renewable energy growth it estimates can be accomplished in those states…

The White House claims that… …the final plan will be stronger than what was proposed in 2014.

How this will hurt individual coal hauling railroads financially is not yet predicted.

To read the entire article, go to http://bloom.bg/1E03Zyt

Three Years Ago This Coal Mine Was Worth $624 Million. // Now just $1 dollar

From Bloomberg, Jul 31, 2015

The destructive force of a collapse in world coal prices has been underscored by the sale of a mine valued at A$860 million ($631 million) three years ago for just a dollar. Brazilian miner Vale SA and Japan’s Sumitomo Corp. sold the Isaac Plains coking-coal mine in Australia to Stanmore Coal Ltd., the Brisbane-based company said Thursday in a statement. Sumitomo bought a half stake for A$430 million in 2012.

A slump in the price of coking coal, used to make steel, to a decade low is forcing mines to close across the world and bankrupting some producers.

Alpha Natural Resources Inc., the biggest U.S. producer, plans to file for bankruptcy protection in Virginia as soon as Monday, said three people with direct knowledge of the matter. It was valued at $7.3 billion in 2008.

To read the entire article, go to http://bloom.bg/1fOuf97

Anglo may cut one third of its jobs as steel industry market demand drops prices

What has taken senior iron ore – steel industry leadership so long to adjust their strategic plans? What are rail and port companies that provide logistics services to Anglo doing to resize their transport service assets?

From Reuters sources http://www.iol.co.za/business/companies/anglo-to-shed-50-000-jobs-1.1890299#.VbJDREr3arV

Headline reads: Anglo to shed 50 000 jobs (over the long term) July 24 2015

Reporter is Silvia Antonioli

Anglo American, the fifth-biggest diversified global mining group by stock market capitalization, announced on Friday that it will move towards the elimination of as much as one-third of its work force. This appears to be a belated recognition of the strategic lower market steel demands and the consequences on iron ore prices in the face of an over supply of resources like iron ore.

It also admits it “might put up more assets for sale”…

It’s Board appears to finally reacting after the accelerating slump in metals prices that seen its stock shares decline to a 13-year low.”

MIGHT GET WORSE

The company posted a steep fall in first-half profit after a rout in prices of metals from platinum to iron ore. The company said “the next six months could be even worse.” “Quite frankly we didn’t expect the commodity price rout to be so dramatic… … CEO Mark Cutifani said during a presentation to market analysts. In the short term, management says it “would cut about 6 000 of its almost 13 000 office-based and other non-production job roles globally”…

If market conditions soured further the company would consider putting up for sale more of its underperforming assets than currently planned, Cutifani said.

Anglo employs 151,000 staff worldwide. I

N ITS PR NEWS RELEASES the company puts a best “spin” on the current financial results as it is about half way through its three year strategic change previously announced to investors. The economic interpretation from the analysts meeting is that they are going to have to move much faster in making changes and/or make bigger changes

REPORTED RESULTS:

Anglo American Interim Results for 2015 include the following cited on the Internet. “Improved operational performance and accelerated cost and capex reductions to mitigate price weakness” says the company in its financial reporting. Group underlying EBIT of $1.9 billion, a 36% decrease due to sharply weaker commodity prices ($1.9 billion underlying EBIT impact), Partially offset by weaker producer country currencies and cost reductions ($0.6 billion underlying EBIT benefit), Commodity price-driven impairments of $3.5 billion after tax, including $2.9 billion at Minas-Rio

FUTURE LOOKING PROJECTIONS include: $1.5 billion of operating and indirect cost reductions and productivity gains targeted in H2 2015 and 2016 (operating costs $800 million, productivity gains $400 million, indirect costs $300 million) Additional company capital expenditure reductions of up to $1.0 billion by end 2016 $1.6 billion of “disposal proceeds” delivered in July 2015