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Contracts signed to ship coal to Korea once again Usibelli Coal Mine says it is working to extend contract, increase amounts shipped The Associated Press
Alaska coal sailed on freighters to South Korea again in September after shippers and a Healy coal producer completed details of a contract.
The agreement followed months of negotiations to restore an 18-year business relationship.
The agreement between Usibelli Coal Mine, the Alaska Railroad and Hyundai Merchant Marine will allow 400,000 tons of coal to be sold annually to Seoul, said Pat Flynn, railroad spokesman.
The shipments, cut off last September after Alaska lost ground to low-cost Pacific Rim producers, resumed the week of Sept. 22 and will last for a minimum of two years. Two trainloads of coal each week will move from Healy in Interior Alaska to tidewater at Seward on Alaska's Southcentral coast.
“We're already focused on extending the contracts and the amounts of the shipments,” said Bill Bittner, an Anchorage attorney representing Hyundai.
The deal hinges on the state-owned railroad purchasing a mothballed coal-loading terminal in Seward, co-owned by a state agency and Hyundai, with a $9.6 million congressional appropriation, earmarked by U.S. Sen. Ted Stevens, R-Alaska. Now that Usibelli and Hyundai have come to terms on the coal purchase price, the railroad is moving ahead to buy the terminal, appraised at $8 million, Flynn said.
The Alaska Industrial Development and Export Authority will receive $5.5 million for its 49 percent ownership of the terminal, said Lynn Kenney, authority development specialist. Hyundai will get $2.5 million, Bittner said.
The remaining $1.6 million of the federal appropriation will be used to upgrade the terminal's loader so that larger ships can pull up to the dock and take on coal.
“The good news for Alaska is that we'll maintain Seward as an export location for Alaska minerals,” said John Binkley, railroad chairman. Coal to Korea for nearly two decades South Korea bought Usibelli coal for nearly two decades. Every year, coal mine executives hashed out the terms of a one-year contract with their counterparts at Hyundai, a global shipping and logistics company, which sold the coal to a Korea utility. The railroad moved as much as 3.5 million tons a year but more commonly transported around 2 million, Flynn said.
The relationship worked until last year, when the Koreans decided to turn to other coal suppliers, including Indonesia, that could provide a cheaper product.
The demise of the contract almost immediately kicked off intense efforts to restore the shipments. The economies of Seward and Healy, and Alaska's ability to ship minerals, such as coal and gravel, depended on it, local and state officials said.
Terminal buyout will retire Hyundai's debt Stevens, chairman of the Senate Appropriations Committee, got Congress to approve the terminal buyout money, intended to retire Hyundai's debt on the plant and encourage the South Korean company to continue purchasing the coal.
The new contract is smaller than prior ones: It involves only 400,000 tons of coal a year. Flynn described it as a “placeholder” contract, meaning it's meant to keep Alaska's foot in the door as it pursues a longer-term, bigger-volume deal. At least it's for 24 months, as opposed to earlier ones that lasted only a year, Bittner said.
“We've doubled that,” he said.
Bittner, who is Stevens' brother-in-law and South Korea's honorary consul in Alaska, said he's optimistic that Usibelli and the railroad will find ways to further reduce costs to keep Alaska coal competitive. Usibelli will hire six workers as a result of the contract resumption, said Steve Denton, vice president of business development. The company had laid off 30 employees after the contract ended.
At the Seward coal plant, some 12 jobs will be saved.
The deal will be completed after the Federal Railroad Administration agrees to release the $9.6 million grant. The railroad expects that soon, Flynn said.
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