Published on March 12th, 2018 | by Tina Casey0
Trump’s Steel Tariff Could Trap Kentucky Met Coal In Retaliatory Nightmare
March 12th, 2018 by Tina Casey
File this one under W for With friends like these, who needs enemies? The US coal power generating sector is rapidly shrinking, but at least coal-producing states like Kentucky could lean on the steady overseas demand for metallurgical coal. Now, however, President* Trump’s new steel tariff could pull the rug out from under this relatively small but vital part of the US coal industry.
For that matter, hundreds of steel workers in the US could also wind up drawing the short stick as a result of the new tariff, but that’s a whole ‘nother can of worms.
Coal Stabbed In The Back, Part Infinity (Again)
This latest piece of bad news for the US coal industry got a thorough airing last week on Western Kentucky University’s WKYU public radio station.
The basic problem is that Kentucky is one of several US states facing international retaliation for Trump’s new tariffs on steel and aluminum.
Specifically, Brazil exports a lot of steel to the US, so it would be hurt by the new tariff. However, to make that steel, Brazil uses a lot of Kentucky’s metallurgical coal, or “met” coal. Met coal is used to make coke, which is used to make steel, so you can see where this is going.
Faced with the new tariff on its steel, Brazil could look elsewhere for met coal — say, Australia perhaps — and leave Kentucky in the lurch. Here’s the rundown from WKYU:
Last week, Brazil reminded U.S. officials that it’s the biggest buyer of American met coal – about $1 billion worth last year – in a statement expressing concerns over the tariffs.
Latin America’s largest economy imported nearly 5.2 million tons of U.S. met coal through September of last year – about 1.3 million more than the next highest consumer, Japan, according to the U.S. Energy Information Administration.
Adding to the hurt on Kentucky’s economy, the state is also looking at retaliatory tariffs on its famous bourbon as a consequence of the new tariffs.
Of course, a drop in demand for Kentucky met coal is just one possible outcome of the new tariff. A best-case scenario would be for the US steel industry to come back to life and plug at least some of the demand gap. According to WKYU’s analysis, though, that’s stretching hope a bit far. Major global steel consumers already have their supply chains locked in, so the US steel industry would have to break through those entrenched relationships.
Kentucky is not the only one facing hurt. The met coal sector is larger in two other Appalachian coal country states that Trump courted, Pennsylvania and West Virginia.
New met coal mines have been planned or opened in recent months in Pennsylvania and West Virginia as well as Alabama, and now those new jobs are at risk, too.
Cyclones Or Not, No Relief In Sight For US Coal
Coal fans were excited over a slight uptick in production during Trump’s first year in office, but in hindsight it looks like the hand of god had more to do with it than any change in US policy. Kentucky’s Murray State public radio station WKMS takes over the story:
…U.S. coal exports to Asia increased in the last year partly because a cyclone knocked Australian coal out of the market…that disruption in global supply — and not domestic regulation changes — explains the bump in US production.
Aside from praying for more cyclones, there’s not much more the coal industry can do. The US Department of Energy is still pitching coal projects, but the idea has little traction among any sector of the US economy other than the coal industry.
Major US businesses are snapping up renewable energy opportunities hand over fist. In contrast, you’d have to search far and wide to find a company actively seeking coal power.
Here’s just one recent example from the Michigan energy company Consumers Energy, involving a wind power opportunity:
General Motors and Switch are the first participants in a new Consumers Energy program to help large businesses use large renewable energy sources. Both companies are now matching 100 percent of their electric use at key operations in Michigan with wind-generated power.
On top of that, Consumers Energy is aiming to ditch coal from its grid profile:
Today, Consumers Energy provides 10 percent of customers’ energy use from renewable sources. Consumers Energy recently announced that more than 40 percent of the energy it produces will come from renewable sources and energy storage by 2040.
The energy provider’s new clean energy goals also include reducing carbon emissions by 80 percent and no longer using coal to generate electricity by 2040.
Good for them.
More Bad News For Coal — And Natural Gas
If you caught that thing about wind power for GM and Switch, that’s the wave of the future. Natural gas has been the main driver pushing coal out of the power generation market, but the rise of low cost renewables means that US businesses can ditch coal and skip the gas, too.
That doesn’t mean natural gas will be squeezed out of the picture any time soon, but it does look like coal will fade into the background sooner than anticipated — with a little help from oil companies like ExxonMobil, Shell, BP and Statoil to name a few.
The latest set of Platt’s reports on power generation paint a grim picture, with coal losing ground to natural gas in the Southwest Power Pool compared to last year.
In the massive Texas ERCOT grid, things look even worse as a consequence of recent coal plant retirements. Gas contributed almost 42% to the ERCOT grid last month and coal only contributed 23%. Wind made a strong showing at 21.5% and nuclear brought up the rear at 13.3%.
As for last year’s uptick in production, coal has a long way to go before it comes back.
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