LAUNCESTON: US coal miners are almost certainly cheering the sharp rise in exports of their product, but their good fortune is mainly the result of Chinese domestic policies that have driven up global prices for the polluting fuel.
While US President Donald Trump and his administration would no doubt like to claim credit for reviving the coal industry, it's likely there has been virtually no structural change that will ensure a sustained boost for US coal exports.
Rather, the situation of the previous years remains intact, which sees the United States as a swing supplier of coal, with additional exports largely dependent on whether prices in Asia are high enough to make the economics of the long sea voyage possible.
This dynamic is shown by looking at the breakdown of seaborne coal exports from the United States, as tracked by Thomson Reuters Supply Chain and Commodity Forecasts.
US coal shipments were 51.9 million tonnes in the first seven months of the year, up 21.3 percent on the same period last year, according to the data.
These numbers may change very slightly given not all July shipments will yet have been captured, but the overall trend is an impressive gain in US coal exports.
If the figure for the first seven months of 2017 is annualised, it puts US exports on track for a total of around 89 million tonnes this year, which would be well above the 65.42 million of 2016 and 2015's 75.01 million.
Looking further into the detail and it appears a good portion of the increase in US exports has been driven by demand from Asia.
Shipments to the region were 17.94 million tonnes in the first seven months of this year, which would equate to about 30.8 million tonnes for the whole of 2017 if the pace is maintained.
US exports to Asia were 21.14 million tonnes in 2016 and 20.8 million tonnes in 2015, according to the vessel-tracking data.
For the first seven months of 2017, US exports to China stood at 4.03 million tonnes, a figure already exceeding the full year total of 2.82 million for 2016 and 2.97 million for 2015.
While China is the world's biggest importer of coal, the US supplies more to India, which ranks second.
For the January-July period, US exports to India were 6.39 million tonnes, on track to exceed the total of 8.67 million for 2016 and 7.6 million for 2015.
US coal exports to Asia are almost certainly price-dependent, given they dropped off sharply when Asian coal prices fell for five consecutive years from 2011, but have started to recover as prices rallied in 2016 and maintained strength so far this year.
The Asian benchmark price for thermal coal, the weekly index at the Australian port of Newcastle, ended at $92.28 a tonne on July 28, largely steady from the $94.44 at the end of 2016, but almost double the $50.63 at the end of 2015.
At the current price US coal can compete in Asia, especially on the US east or Gulf coast to India route, but also on the California to China or North East Asia route.
Data from consultants CRU show that the weighted average business cost for US thermal coal, or the price where 50 percent or more of operations in the country have positive cash flow, lies at $83.22 a tonne.
While this means that it's currently possible for many US coal miners to export to Asia, they are still only just at viable levels, once freight costs are factored in.
Not only do the main coal exporters of Australia and Indonesia have lower production costs, they also enjoy cheaper freight costs for cargoes bound for Asian customers.
US COAL EXPORTS VULNERABLE
While it is possible that US miners can lower costs further on the back of fewer regulations and a more supportive administration in Washington, it's still unlikely that they will be able to compete with the costs of Australian miners, which are closer to $54 a tonne.
This means that should thermal coal prices moderate, the US exports are the most at risk of being pushed out of the market.
Coal prices have been supported by ongoing demand from China, with imports surging 23.5 percent to 133.26 million tonnes in the first six months of this year, compared to the same period last year.
The point is that both of these factors are likely to be temporary, with Chinese domestic coal output already rising with a 10.6-percent gain in June as the authorities encourage increased production.
Hydropower is also likely to recover once the weather-related restrictions ease, which is likely to trim demand for coal-fired power.
Exports of coking coal, used to make steel, have also been a traditional area of strength for US miners, and they will have been boosted by the disruption of exports from top shipper Australia in the wake of a major cyclone in March.
While US coking coal can be profitably shipped to Asia at current prices, it will once again have to compete with Australian cargoes now that the damage from the cyclone has been repaired and exports are flowing once again.
Of course, it's not just Asia where US coal exports have been rising, they have also gained in Europe, with shipments to France doubling in the first five months of 2017, according to figures provided by the US Energy Information Administration.
France has suffered from nuclear outages this year, requiring it and neighbours to rely more on coal-fired power.
But, similar to Asia, these are likely temporary factors and once they fade it's likely that seaborne coal prices will retreat.
Assuming coal prices do moderate over the rest of 2017, it will be difficult for the United States to maintain the growth rate of exports.