Trade War Affecting the Coal Industry but Hope Persists
While you pursue online stock trading and investing, you need to keep in mind governmental policies that could significantly impact the stock market. International trade policies can affect the state of stocks significantly.
Coal mining companies are worried about the impact of the trade war on their exports, according to this Reuters report on Nasdaq. Exports are the lifelines of the American coal industry, and though the Trump administration has been in favour of the coal industry in general, the tariff moves against China and the counter moves by China on imports from the United States could significantly affect one of the primary income sources of coal companies in the US.
Coal among Products Tariffed by China
China has also added coal with the other energy products that it is imposing tariffs on. Coal companies are already witnessing decreasing Chinese demand as a result of the tariffs. One of the major American coal companies, Consol Energy ($CEIX) was in negotiations for supplying up to a million tons of metallurgical coal per year. The deal could potentially be delayed, though there is no clear information in this regard.
According to the US Energy Information Administration (EIA), American coal exports to Asia in 2017 rose to 32.8 million tons. That's double the exports in 2016, which stood at 15.7 million tons. Exports to China alone in 2017 were a significant 3.2 million tons. That's more than a massive improvement considering that there were no exports to the country in 2015 and 2016, as per the EIA's estimates.
The Entire US Mining Industry Watching out for Developments
The National Mining Association is reportedly watching the developments closely. Spokeswoman Ashley Burke acknowledges that exports have really been the "bright spot" of the entire mining industry, and that any potential roadblock to coal exports to any country is of particular concern.
The concerns in the US coal industry, and the US mining industry in general, are similar to the worries spreading in the American farm country regarding the government's stance on international trade intended to protect the American industry. But the unintended consequences of this stance are actually affecting the industries that Trump sought to protect at the beginning of his presidency. The international market for US crops has been diluted, according to Reuters.
Negotiations with Chinese Buyers Expected to Be Revived
But there is some hope for coal, because of the negotiations Consol and other coal operators have been involved in with Chinese buyers. There is hope that these talks will be revived. In fact, steel mills and other buyers in China have been shocked by the addition of coal to China's list of American imports to be tariffed, particularly when the country had been advising its trading firms and steel mills to buy more coal to bring down the trade deficit, reports Reuters. Consol believes that in the long term, China would buy American coal for offsetting the trade deficit.
Domestic Coal Demand Could Be Boosted
West Virginia Coal Association vice president Jason Bostic believes that the US government's tariffs on aluminum and steel would raise demand for metallurgical coal back home, which stands at around 23 million tons per year currently. The increased domestic demand would help offset the reduced demand from China to some extent.
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