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Usibelli resumes negotiations with Koreans, federal funding catalyst
Patricia Jones, PNA contributing writer
Usibelli Coal Mine is back at the negotiation table with Korean coal buyers in hopes of inking a new contract to provide Healy coal once again to the company’s former single largest customer.
“We’re reasonably optimistic that we will get a renewal on the contract, but we don’t have one in hand yet,” Steve Denton, vice president of business development at Usibelli, told Petroleum News Alaska March 17.
Coal exports from Alaska to Korea tapered off last year and concluded in October, as Usibelli could not come to price terms to provide another year of energy supply to the Asian power plant customer. As a result, 30 to 35 people — almost one-third of Usibelli’s work force — lost their jobs last year at Alaska’s only operating coal mine.
“We had already reduced our price to the coal mine to the point where it was not prudent to try to continue to reduce it any further,” Denton said, about the past failed contract talks.
But he’s now optimistic that coal shipments to Korea will resume, possibly before this summer.
The change comes, in part, from $9.6 million in federal funding that’s been allocated to the coal loading port facility in Seward. (See related story on page 12)
A reduction in transportation costs could make the difference in the bottom-line price for Usibelli coal, Denton said.
“Everything adds into the equation,” he said. “The bottom line is that the price that we could offer (in 2002) was not competitive.”
Negotiations with the Korean coal purchasers have been going on for some time, he said. “I can’t imagine it going for too much longer,” Denton said. “When we get a contract and start shipping — I think it will be before summer, but I can’t be certain of that.” Long-term contract over Usibelli began selling coal to South Korean power plants in 1984, using Hyundai Merchant Marine as the ocean-going freight service and as the sales company to deal directly with the Asian customers.
“We negotiate a price for coal from the mine. Beyond that, we’re not in negotiations with the buyer in Korea — we’re only dealing with Hyundai Merchant Marine,” Denton said. “They actually have the contract with the customer in Korea.”
In its first negotiations with the Korean coal buyer, Usibelli signed a 10-year supply contract. After that long-term contract expired, it was extended usually on a year-to-year basis, Denton said. Usibelli failed to land a contract extension for 2002, although some coal was shipped during the first part of the year to fill out supplies purchased in 2001, Denton said.
Those past Korean coal sales amounted to nearly half of Usibelli’s average annual coal production. Yearly coal shipments to Korea ranged from 600,000 to 750,000 metric tons, Denton said.
Usibelli’s total coal production tapered off to 1.2 million metric tons in 2002, compared to an average of 1.5 million metric tons in past years, logged in the Alaska Mineral Industry report. Less coal this time Current contract talks indicate that Usibelli will provide about 400,000 metric tons of coal for the Korean contract, Denton said. “It’s about two-thirds of the previous volume.” Usibelli will need to rehire six to nine people to meet the contract requirements, Denton said, a mix of equipment operators and maintenance workers.
“It doesn’t add a full year’s worth of work for a new crew,” he said. “It’s nowhere near what we lost, but every bit helps.”
Since 1984, Usibelli has shipped more than 17 million metric tons of coal from Healy to the Honam power plant, owned by Korea Electric Power Co., according to the company’s website.
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