Global markets affect domestic prices, exports and infrastructure.
Mason Caperton and Scott Davis are consultants with Ventyx's Energy Advisers Group.
Who knew coal-supply issues in countries far away from U.S. markets could have a massive impact on domestic supply and pricing, helping to increase prices for Appalachian coal by 260 percent in the past year? Despite what might have appeared to be an isolated U.S. coal market, recent events throughout the globe, such as supply disruptions in Australia and South Africa and increasing demand in some Asian countries, have shown that U.S. markets indeed are a major part of the global coal economy. Countries like Australia, South Africa and China are major players in the global coal market on both the supply and the demand side, and while it may not have been seen before, their problems can ripple far beyond any country’s borders.
The global seaborne coal market naturally divides into the Atlantic and Pacific markets. Historically, there has been little supply competition between the two. The Pacific market’s largest coal suppliers are Australia, Indonesia and China. Australia exported approximately 215 million tons of coal into the Pacific market in 2006. Indonesia exported 130 million tons into this market, while China exported 77 million tons. All three countries are major suppliers of the Pacific market and only recently have supply disruptions from these sources been shown to have a major impact on global coal economics.