COAL EXPORTS TO CHINA FROM AUSTRALIA, THE U.S. AND MONGOLIA

COAL EXPORTS TO CHINA

Elisabeth Rosenthal wrote in the New York Times, “Even as developed countries close or limit the construction of coal-fired power plants out of concern over pollution and climate-warming emissions, coal has found a rapidly expanding market elsewhere: Asia, particularly China. At ports in Canada, Australia, Indonesia, Colombia and South Africa, ships are lining up to load coal for furnaces in China, which has evolved virtually overnight from a coal exporter to one of the world’s leading purchasers.” [Source: Elisabeth Rosenthal, New York Times, November 21, 2010]

“Traditionally, coal is burned near where it is mined---particularly so-called thermal or steaming coal, used for heat and electricity. But in the last few years, long-distance international coal exports have been surging because of China’s galloping economy, which now burns half of the six billion tons of coal used globally each year. As a result, not only are the pollutants that developed countries have tried to reduce finding their way into the atmosphere anyway, but ships chugging halfway around the globe are spewing still more.” [Ibid]

“And the rush to feed this new Asian market has helped double the price of coal over the past five years, leading to a renaissance of mining and exploration in many parts of the world. “This is a worst-case scenario,” said David Graham-Caso, spokesman for the Sierra Club, which estimates that its “Beyond Coal” campaign has helped to block 139 proposed coal plants in the United States over the last few years. “We don’t want this coal burned here, but we don’t want it burned at all. This is undermining everything we’ve accomplished.” [Ibid]

“Although it has plentiful domestic supplies, China imports coal because much of its own is low grade and contains impurities. Coal from the Powder River Basin of Montana and Wyoming tends to be low in sulfur, for example, allowing power plants to burn more without exceeding local pollution limits. Additionally, much of China’s coal is inland while the factories are on the coast; it is often easier to ship coal from North America, Australia or even South America.” [Ibid]

“China, which was a perennial coal exporter until 2009, the first year that it imported more than it sent out, is expected to import up to 150 million tons this year. The lucrative export trade with China is expected to continue, said Ian Cronshaw, head of the energy diversification division at the International Energy Agency. For some economies, China has been a lifesaver. Although Colombia’s coal exports collapsed in 2008 when demand in America and Europe plummeted, they revived this year, with 10 million tons going to Asia.” [Ibid]

Australian Coal Exports to China

Elisabeth Rosenthal wrote in the New York Times, “For Australia, coal exports to China grew to $5.6 billion from $508 million between 2008 and 2009, government statistics show. While it still sends more coal to its longtime customers Japan and Korea, that balance could shift as Australian coal giants sink billions into new projects like China First. “They are betting that there will be great markets for coal in China,” Mr. Cronshaw said. [Source: Elisabeth Rosenthal, New York Times, November 21, 2010]

In the summer of 2010 “an Australian company signed a $60 billion contract with a state enterprise, China Power International Development, to supply coal to Chinese power stations beginning in 2013 from a vast complex of mines, called China First, to be built in the Australian outback. It was Australia’s largest export contract ever, the company said. The deal points to the love-hate relationship many wealthier countries have with coal: while environmental laws have made it progressively harder to build new coal-fired power plants, they do not restrict coal mining to the same extent.” [Ibid]

“That is partly because emissions accounting standards focus on where a fuel is burned, not where it is dug up; because the coal trade is a lucrative business; and because the labor-intensive mining industry creates jobs. Such benefits are particularly hard to forgo in the midst of a recession. In the last two years, “There has been an awful lot of mining development, and much of it is based on the potential of these new markets,” said David Price, director of the global steam coal advisory service at IHS-Cera, a global energy consultancy.” [Ibid]

Australia, environmental groups are not happy with the arrangement. Rosenthal wrote they “have repeatedly halted trainloads of coal headed to the export docks at Newcastle this fall, and flotillas of kayaking protesters have delayed cargo pickups by Asia-bound coal ships. Julia Gillard, Australia’s newly elected prime minister, promised during her campaign to “put a price on carbon”---in other words, make companies pay in some way for excessive carbon dioxide emissions. But environmentalists say that such laws will be meaningless if the country continues its nascent coal rush and “exports global warming to the world,” as one group, Rising Tide Australia, puts it.” [Ibid]

American and Canadian Coal Export to China

Elisabeth Rosenthal wrote in the New York Times, “The United States now ships coal to China via Canada, but coal companies are scouting for new loading ports in Washington State. New mines are being planned for the Rockies and the Pacific Northwest. Indeed, some of the world’s more environmentally progressive regions are nascent epicenters of the new coal export trade, creating political tensions between business and environmental goals.” [Source: Elisabeth Rosenthal, New York Times, November 21, 2010]

Vic Svec, senior vice president of Peabody Energy, the world’s largest private coal company, told the New York Times it was “planning to send larger and larger amounts of coal” to China. “Coal is the fastest-growing fuel in the world and will continue to be largely driven by the enormous appetite for energy in Asia,” he said. [Ibid]

In 2009 “the United States exported only 2,714 tons of coal to China, according to the United States Energy Information Administration,” Rosenthal wrote. “Yet that figure soared to 2.9 million tons in the first six months of this year alone---huge growth, though still a minuscule fraction of China’s coal imports. New mines are planned to expand the market further. Earthjustice, a nonprofit environmental law firm, is suing to block the lease of state-owned land in Otter Creek, Mont., to Arch Coal for mining to serve demand in Asia and elsewhere. Likewise, Peabody Energy and Australia’s Ambre Energy have been separately expanding mines and exploring the idea of opening loading ports in the Pacific Northwest.” [Ibid]

“In Washington State, the city of Tacoma decided Friday that it would not host a proposed coal loading plant, citing “a multitude of business and community factors.” This week officials in Cowlitz County are expected to decide whether to grant a permit for a proposed coal port in Longview, on the border with Oregon. Environmental groups will be there to oppose the port, noting that policies in both states effectively block new coal-fired plants and that both have plans to close the few that remain. “It’s one step forward, 10 steps back if we allow coal export in our region,” said Brett VandenHeuvel, executive director of the environmental group Columbia Riverkeeper.” [Ibid]

“Likewise, environmentalists in British Columbia, which enacted the first tax on carbon dioxide emissions in North America two years ago, are incensed that Vancouver has blossomed into a major coal loading location. “It’s just hypocritical,” said Ben West, a spokesman for the Wilderness Committee, a Canadian conservation group.” In the summer of 2010 “Jim Prentice, who was then Canada’s environment minister, announced a national phase-out of dirty coal-fired plants. But mines are primarily regulated by the provinces, said Henry Lau, a spokesman for the ministry. The Canadian government adds that while it is committed to its target of reducing emissions by 17 percent below 2005 levels by 2020, it has to balance “environmental and economic benefits for its citizens.”The growth and shifts in coal exports to China are impressive, flowering even during the recession. Seaborne trade in thermal coal rose to about 690 million tons this year, up from 385 million in 2001.” [Ibid]

China Seeks More Coal in Nearby Mongolia

Andrew Higgins wrote in Washington Post, China has large quantities of coal, which provides around 70 percent of its energy, but it still needs more and is now a major importer. It particularly needs what lies just below the surface at Tavan Tolgoi: huge quantities of high-quality and easily mined coking, or metallurgical coal, which is used to manufacture steel. Mongolia’s Gobi Desert contains enough to meet China’s current level of import needs for at least 160 years. [Source: Andrew Higgins, Washington Post, July 16, 2011]

Over the past five years, China has increased its imports of coking coal tenfold. Mongolia last year accounted for a third of those, and it could play an even bigger part in firing its neighbor’s steel mills as China’s mines run out of the high-grade coal required by modern blast furnaces.

China’s demand for the coal, uranium and other minerals that Mongolia has in abundance---but has so far barely touched---is gargantuan and growing. China, which surpassed the United States as the world’s biggest energy user in 2009, needs to find enormous quantities of new fuel to meet what, according to the International Energy Agency, will be a 75 percent increase in its energy needs by 2035. But as China scours the globe for coal, oil, uranium and natural gas---and hunts for rivers just beyond its borders on which to build electricity-generating dams---it increasingly confronts a stubborn reality: What Beijing and foreign businessmen embrace as a simple law of supply and demand stirs complex, and sometimes dangerous, political passions, security fears and big power rivalries.

In 2010, Mongolia nearly doubled its sales to China, which absorbed 84 percent of all its exports---three-quarters of which were coal and other minerals. But this is just the start. The vast bulk of Tavan Tolgoi is still untouched and eagerly eyed by Chinese, Russian and American companies that want to profit from China’s insatiable demand. Mongolia could multiply its coal exports across its southern border many times over---if only it could get the stuff there swiftly and cheaply.

Mongolian Coal Business and China

Reporting from Tavan Tolgoi, Mongolia,Andrew Higgins wrote in Washington Post, “Overlooking a deep black gash in the Gobi Desert, Od Jambaljamts watched Caterpillar trucks rumble across the rim of the world’s biggest undeveloped coal deposit---and mused on Mongolia’s good fortune to have the world’s most voracious consumer of coal just a few scores of miles away. “China is so big that even if they cut their economy in half they will still need what we have here,” said Od, a former Mongolian diplomat in Washington who, along with his younger brother, now controls the Mongolian Mining Corp.[Source: Andrew Higgins, Washington Post, July 16, 2011]

The license that Od and his brother Odjargal have to dig up a tiny part of Tavan Tolgoi dates from 2006, a time when foreigners and many locals saw little profit in the remote, inhospitable region. They have since built a small airport, a power station and a coal processing plant---and even tried to build a private railway to the Chinese border, but that got snarled in politics. They are building a road instead.

When Mongolian Mining Corp. listed on the Hong Kong stock exchange last year, investors, impressed by its China prospects, splashed out $650 million to buy 20 percent of the company. That means that Od, president of a holding company called MCS, and his brother, the executive director of the mining company, are billionaires, at least on paper.

With China so close and so hungry for energy---and Mongolia so rich in what China needs---locals with mining licenses and a swelling swarm of foreign investors believe that only the absence of modern transport links to China clouds Mongolia’s future as a would-be Saudi Arabia of coal. It should therefore have come as good news when Mongolia recently started preparations for a new railway line from Tavan Tolgoi, the first such link with the epicenter of this landlocked nation’s nascent, China-driven mining boom. But there is a problem: The new track will not go to China. Instead, it will head hundreds of miles in the opposite direction toward Russia---and carry a heavy freight of suspicion and wariness that impedes China’s global quest for energy.

Coal is transported in convoys of trucks across unpaved desert tracks, a method that is expensive, slow and hazardous. A railway line to China is a no-brainer,” said Od, the former diplomat. (China was due to finish a line to its side of the frontier in late 2011).

Why Mongolia is Reluctant to Export More Resources to China

“In the 21st century, whoever controls energy controls everything,” Sanjaasuren Oyun told the Washington Post. She is a member of the Mongolian parliament, a Cambridge University-educated geologist and former foreign minister. She says that Mongolia needs a railway to the Chinese border but that it has to make sure the country doesn’t just become a grab bag for China-bound minerals. [Source: Andrew Higgins, Washington Post, July 16, 2011]

Battulga Khaltmaa, a former wrestling champion who is in charge of Mongolia’s railway-building program, said that a track to China will come one day but that first Mongolia needs to start laying rails away from China. That, he said, will curb dependence on the Chinese market by opening up alternative export routes to Japan and South Korea and also anchor a planned industrial zone at home. Mongolia, he said, doesn’t want to just shovel raw materials into China and end up “lazy” like oil-fattened Saudi Arabia, with a “few families controlling the country and making all the money.” “We have to think about national security, our traditions, our lifestyle---not just profit,” said Battulga, Mongolia’s minister of roads, transportation, construction and urban development.

Friction Between Mongolia and China

Andrew Higgins wrote in Washington Post: Bitter rivals for centuries, with each ruling the other at various times, China and Mongolia get on for the most part. But China’s sheer size, its past claims on Mongolian territory and its desire for Mongolia’s mineral wealth stir a deep wariness of what will come from ever-closer ties between an authoritarian and sometimes truculent would-be superpower with 1.3 billion people and a mostly uninhabited, democratic land with a population of 2.8 million. [Source: Andrew Higgins, Washington Post, July 16, 2011]

Asked in a recent nationwide opinion poll “which country is the best partner for Mongolia,” respondents ranked China last---behind Russia, the United States, Japan, South Korea and the European Union. There are now more students studying Chinese in Mongolia than Russian, once a lingua franca in what was until 1991 an effective Soviet colony. But suspicion of the Chinese is strong, at times rising to the level of hostility.

Nearly a quarter of the 25 Chinese teachers at the Ui-Tsai Secondary School, in the capital of Ulaanbaatar, have been mugged this year. Lou Zhengquan, the head of a Chinese construction firm building a tall office block in the center of the city, said he never walks the street alone and advises his Chinese laborers to stick to the building site.

In April, Mongolia shut down all traffic traveling across the Gobi Desert from Tavan Tolgoi to the Chinese border after protests by nomadic herders furious about convoys of coal trucks throwing up huge clouds of grit and a series of fatal accidents. Many of the drivers, according to Battulga, the transport minister, were Chinese trespassing deep into Mongolian territory to collect coal. China has also at times interrupted border traffic. It closed the frontier briefly in 2002 to protest a visit to Mongolia by the Dalai Lama, the Tibetan spiritual leader, who has many followers here.

Mongolian Energy Partnerships

Andrew Higgins wrote in Washington Post: Mongolian leaders play down anti-Chinese sentiment and cheer the opportunities offered by China’s growth, but they also try to keep China’s clout in check. When Mongolia invited bids for the development of huge Tavan Tolgoi deposits still in the hands of the state, it promoted the idea of an alliance between China’s state-controlled Shenhua Energy and Peabody Energy, a coal company based in St. Louis. But the hoped-for Sino-American partnership collapsed, Mongolian officials said. [Source: Andrew Higgins, Washington Post, July 16, 2011]

Now, after repeated false starts, authorities are due to announce a decision soon on competing bids from China, Russia, the United States, Japan and elsewhere. Beijing, Moscow and Washington have each leaned on Mongolia to opt for its candidate. Making a decision “is not an easy job,” as it involves “big politics, geopolitics and also economics,” said Enebish Baasangombo, executive director of Erdenes MGL, the state company in charge of the bidding process and overall development of state-held portions of Tavan Tolgoi. Eager to juggle its various suitors, Mongolia will probably ask Shenhua of China, America’s Peabody and Moscow’s entry, state-owned Russian Railways, to develop a big chunk of Tavan Tolgoi together.

Mongolians “are nomadic people” but “cannot just move away from here,” said President Tsakhia Elbegdorj, a former military journalist and a big fan of Genghis Khan, whose grandson conquered China in the 13th century. Geography, the president said, means that Mongolia has to balance the interests of China and Russia while nurturing close ties to the United States.

China and Russia have offered money to help finance Mongolia’s railway-building plans from Tavan Tolgoi. Beijing wants the line to head south and use Chinese-gauge tracks. Moscow wants it to go toward Russia and to use Russian-width track, which is incompatible with China’s network.

For the moment, tangled feelings toward China have trumped linear economic logic. But, predicted Od, the former diplomat in Washington, this will change. China is “like a big vacuum that sucks everything in,” Od said. “We are very lucky.” Elbegdorj is not so sure. “The challenge of our generation is how to deal with that sucking,” the president said.

Image Sources: Westport Schools; BBC; Environmental News; Tropical Island

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

Last updated April 2012


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