Tuesday, September 24, 2013

U.S. Coal vs. the World - WSJ.com

HEARD ON THE STREET: U.S. Coal vs. the World - WSJ.com:

Beijing has recognized that a growth model skewed towards heavy investment is unbalancing the economy and poisoning the environment. As China seeks to boost consumption and services, the electricity required to generate each incremental yuan of gross domestic product should decline. Furthermore, a slower pace of infrastructure investment should curb growth in Chinese steel demand. Meanwhile, ferocious smog in Beijing and elsewhere has sparked protests, prompting a government pledge this month to cut coal use in eastern parts of the country. Carbon isn't the burning issue here, but the effect could be much the same as the EPA's moves in the U.S., with coal losing market share to gas and renewable power.
Compounding the issue for U.S. miners is that China's own coal industry is improving. Sanford C. Bernstein points out that the country's top 55 miners account for more and more of China's coal production, suggesting smaller, less efficient operators are being acquired or squeezed out.And consolidation, as well as China's growing rail network, should ultimately reduce the cost of domestic coal, limiting the need for imports further. Bernstein sees Chinese coal imports peaking in 2015. U.S. coal miners can hardly expect the likes of India and Europe to pick up all the slack.
Clean coal remains more talk than reality. Cleaner coal might be more likely. If the cost of natural gas remains low, the coal firing power plants won't make much sense. Seeing the climate change debate shifting from whether it is true to whether human have caused it. We may see the shift to whether to tax carbon or cap-and-trade.

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