The snowcapped mountains of Vancouver Island are a spectacular backdrop for the Westshore Coal terminal south of Vancouver, British Columbia.

14 February 2011

Millennium Eager to Cash in on China's Demand for Coal

Vancouver British Columbia - Four decades ago, the Westshore coal terminal was born in Western Canada in response to increasing Japanese demand to fuel the emerging nation's steel industry.
 
Today, Westshore is exporting more than twice as much coal, and it's seeing another spike in demand from another Asian economic power, China.
 
Coal producers and exporters are straining to meet Asia's rising demand for coal, and that bodes well economically for a Longview, Washington, USA, coal terminal proposed by Millennium Bulk Logistics. Millennium hopes to export as much as 5.7 million tons of Wyoming and Montana coal to Asia, mostly China, through a US$100 million terminal it wants to build at the old Reynolds Metals Co. site.
 
Westshore, which exported 20 million tons last year, is the granddaddy of coal terminals on the Pacific Coast. But both Westshore and Millennium officials say there's plenty of business to go around, even though the industry has gone through boom-and-bust cycles before.
 
Westshore General Manager Denis Horgan, who's worked in the coal business for 35 years, said he thinks a small-scale terminal like Millennium's could pencil out financially. Demand for North American coal to generate electricity, known as "thermal" coal, is growing in China and India. The big question is how long demand will last, Horgan said.
 
"The reason there isn't a coal terminal off the U.S. West Coast is that the export thermal business has never been viable for a sustained period," he said.
 
The recession cut down on domestic coal demand, and flooding in Australia cut back on supply and increased foreign demand for North American coal, he said. Coal prices began a slow rebound last year after falling as much as 70 percent during the recession. Now, Westshore, which employs 260 workers at its Vancouver, B.C., terminal, is having a hard time keeping up with demand, despite investing $49 million to boost its handling capacity to 29 million tons annually.
 
"Already it seems that isn't sufficient," he said.
 
Thermal coal, burned to power homes and factories in Europe and Asia, is a small but growing part of Westshore's business, comprising 10 percent of exports, Horgan said. Westshore's exports of U.S. coal, almost all of it from the Powder River Basin in Wyoming and Montana, have increased eleven fold since 2004, Horgan said.
 
Asian coal demands are expected to keep surging because China needs millions of tons annually to fuel its superheated economy. That's where Millennium hopes to cash in.
 
Millennium expects the new terminal would generate one or two train trips to the terminal daily, bringing as many as 250 rail cars through Longview. The company expects to employ 70 people and generate US$3.2 million in tax revenue annually. Even though the potential market is huge, though, there are limits to what the Longview site can handle, mostly due to limited railroad capacity, Joe Cannon, Millennium's CEO, said in an interview last week.
 
"There's no question that you could put more coal there, but that would take a whole new permit, a whole new market," Cannon said.
 
The old Reynolds site is served by a old, secondary rail line, and trains bound for there will have to cross Oregon Way, Industrial Way, and Seventh Avenue. New tracks and spurs would be needed for Millennium to expand beyond its initial plans, Cannon said.
 
"It would take a really major look at upgrades to the whole rail system around here. There's no way, without significant rail changes, that something like that could happen around here," he said.
 
Despite the limits, Cannon said that he believes the terminal can be a success.
 
Erik Olson.