Coal Trade Means Shipbuilders' Goldmine

The supertanker, symbol of both environmental destruction and the industrialized world's reliance on Third World oil, may itself be on the way out-victim of the energy crisis, to be replaced by big new ships carrying coal. As the world switches slowly away from oil the trade in coal probably will increase dramatically. As it does so, . the structure of the trade will change. Much of the coal will be shipped by water.

Right now world trade in coal is minuscule (126 million tons out of 3.3 billion produced in 1978). But these figures are misleading, for most export coal is used to make coke for steel, and is especially crucial to the steel industry in Japan where all raw materials are imported. Until a few years ago the U.S. was the largest coal exporter in the world with shipments going to Ontario, where coal was used to make electricity, and to Japan, France and West Germany for steelmaking. The finest coking coal in the world has long been mined in a small triangular swatch of land in Appalachia, where southwestern Virginia, southern West Virginia and eastern Kentucky come together.

During the last decade, however, U.S. influence declined from 47 percent of the total in 1970 to 14 percent in 1978. Moreover, the energy crisis changed the nature of the trade away from steel-making coals to thermal coals used in the production of electricity. According to some private estimates trade in these thermal coals is expected to increase by 78 percent in the mid-1980s.

Australia, Canada, Poland and South Africa all have increased their shipments of coal at the expense of the U.S. These four accounted for 91 percent of all coal exports in 1978, with Australia the leader by far. Poland was second, followed by South Africa. Both Japan and the nations of the European common market are expected to dramatically increase their imports of coal for electricity. South Africa and Australia should benefit the most from increased orders.

The U.S. economy is not as adversely affected by these trends as one might at first conclude from looking at the figures. While shipments from Appalachia have declined, shipments from Canada and Australia are by American-owned companies. In Australia, for example, Utah International, a subsidiary of General Electric, is a major coal mining company engaged in joint ventures with the Japanese. International oil companies headquartered in the U.S. such as ARCO have also taken positions in Australian coal. Kaiser Steel, the American steel company, still has significant holdings in Kaiser Resources, which mines coal in western Canada for export to Japan.

While much of the new trade in thermal coal may follow the routes already etched by metallurgical coal, the structure of the trade over time is likely to change. For example, there has been considerable recent speculation about exporting Australian coal to Europe and to Gulf coast ports in the U.S. The Chinese, who have major coal mines, are beginning to supply the Japanese with thermal coal, and depending on long-range Chinese economic development, could become a factor in a wider trade. For the time being it is believed the Chinese will use coal at home, freeing up oil for export.

Recent discussions between Canada and Mexico have emphasized energy exchanges, which could tie those two nations closer together and lessen their dependence on both supply and markets in the U.S.

One possibility is for the Canadians to supply technology, wood, nuclear power and coal to Mexico in exchange for Mexican oil delivered to Montreal refineries, now dependent on U.S. oil companies.

Along with shipment of coal, growth in the trade will involve coal technology, perhaps best exemplified by the recent decision among American and South African companies to construct a South African-type synthetic fuels plant in the U.S. Synthetic fuels technology in South Africa was developed in part by U.S. industry, most notably the California-based Fluor Corporation, although heretofore it has not been employed in the U.S.

Nowhere is the advent of a new international trade in coal more important than in the shipping industry. Since the middle of the last decade the world shipping industry has been in the doldrums. The huge supertankers have swung empty at anchor or plied the world's oceans at a snail's pace because off the generally reduced demand for oil. The Japanese shipbuilders, leaders of the world industry, laid off thousands of workers, and some companies went bankrupt. The emergence of the spot market over the last year further contorted the tanker industry, for the spot business requires relatively small ships picking up and dropping off loads from many depots. The big supertankers are only economical on long surging runs around the world's oceans, and there are few harbors to accommodate them at any rate.

The Japanese earnestly hope coal will be an answer to doldrums in the shipping business. One Japanese line recently placed its first order for a coal tanker, and industry surveys suggest Japanese yards may build as many as 200 coal tankers by the end of the century. These big new dry bulk tankers will be used to haul iron ore, another commodity whose trade is expected to increase as Third World nations establish steel industries, and grain. All in all, by the year 2000 shipping experts predict the dry bulk carriers may have replaced the oil tankers as the most important class of ships on the high seas.