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Interview: Paul Reagan, President of Sampling Associates International

Paul discusses how China’s recent introduction of import tariffs will impact US coal export dynamics.

We look forward to having you chair the coal supply chain infrastructure session at the 15th Coaltrans USA conference. What do you think is the greatest challenge for producers in transporting coal within the domestic US market and why? 

My business is mainly in the export side of things but I believe there is truth to the often heard comment that the rapid increase in the movement of oil by rail has become strong competition to coal for  the availability of locomotive power.

How are China’s recent introduction of import tariffs impacting on US coal export dynamics?

I do not see this development as having a huge impact on US coal export dynamics – but mainly because there are so many other stronger headwinds facing the US coal export market.  Since the US exports a small percent of its total production while its main competitors export almost all of their production, there is no incentive for chasing the market price down or trying to lower costs by producing and exporting more.  What happens in China is still important but there are other things to worry about – such as China’s potential for exporting coke – which will depress markets for US metallurgical coal.

The million dollar question for many in today’s coal industry, is how long will we continue to suffer? In your opinion within what timeframe could US thermal coal export prices reach $100 again?  

I have said this to many who have asked me a question of this type – if I really knew I would not be sampling coal for a living.  I have been in the business now for 33 years and have seen my share of cycles.  When things are going well, it is hard to see the downturn, and when things are going poorly it is hard to see the turnaround – yet it always has happened (so far).  The headwinds I mentioned in the question above seem particularly severe and long lasting this time.  The shale gas revolution is a long term driver.  The shift in China’s raw material consumption is a long term driver.  Add to this the strength of the US dollar and it is easy to see why the industry is so pessimistic.  I cannot say I am optimistic but I am hopeful.  But I do not currently see any way that we can escape a couple of very tough years in the US export industry short of declaring war on Australia (just a joke – do not want to give anyone ideas).  

What other key factors influence the US coal export business?

You hear a lot about Australia and Indonesia influencing the market because of the magnitude of their exports, but we have another strong competitor close to home.  Colombia is growing as a competitor and just in the last year they have built significant port capacity.  They already have low costs and if they can improve the internal rail delivery system, they will be formidable.
You have been with SAI for nearly 30 years. Who has inspired you most in the course of your career and why?  

Interesting question.  Two people.  My predecessor at SAI, Jay Williams, was one for sure.  He was the architect of our company and the systems and approach he instilled in us have stood the test of time.  The second is Ernie Thrasher.  I have known Ernie for all of my 33 years in the business and it is great to see him be so successful, yet keep his ability to connect in a sincere human way with everyone he meets.  

This content is provided by Coaltrans Conferences for informational purposes only, and it reflects the market and industry conditions and presenter’s opinions and affiliations available at the time of the presentation.

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