Banks are lending to coal projects again!

[Jan van Eck + 7,558]

Looks like the predicted demise of King Coal was premature.  It turns out that Pres. Trump's support of the coal industry has awakened the coal giants...

 

Five of the country’s biggest banks are lending tens or hundreds of millions of dollars to coal companies again, in one case eclipsing what they lent in 2014, before the industry entered a nose dive, according to an analysis by Rainforest Action Network, a liberal environmental group.

JPMorgan’s coal lending increased to $654 million 2017 from $32 million in 2015, according to the analysis. That was more than the $570 million the bank lent to coal interests in 2014. The vast majority of JPMorgan’s coal loans in 2017 were to Peabody, which emerged from bankruptcy that April.

https://www.nytimes.com/2018/05/28/business/banks-coal-loans.html

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That coal will have a plurality of homes.  Most of it will end up used for electricity generation, and that puts coal directly in competition with both oil and natural gas.  Some will go as metallurgical coal for steel-making.  And I suspect quite a bit will be exported, to countries that will use it for electricity generating.  

[Rodent + 1,424]

Good, because the royal bank of scotland just pulled all funding for coal and lots of oil projects as well. 

[Jan van Eck + 7,558]

17 hours ago, Rodent said:

Good, because the royal bank of scotland just pulled all funding for coal and lots of oil projects as well. 

RBS has taken some serious loan losses and also owns other banks which for marketing and legal purposes have kept their original charters and names (i.e. Citizen's Bank in the USA).  No surprise that they have chopped their loan portfolio down. You have to wonder about the quality of their loan managers, and that brings more speculation about their recruiting methods for managers.......

RBS at one point was big on shipowner loan portfolios.  If you were a Greek interested in buying a fleet of containerships or dry bulk carriers to put out for charter, the RBS was a player in loaning those funds (secured by the boat).  Where this went wrong was that if the vessel supply  went up (because lots of others were getting into that sector) then the charter rates sank into the mud and if the vessel cannot earn anything then it has no intrinsic value above scrap value.  So then these Greeks would get upside down and the loans become non-performing, and who is the Buyer out there for that loan?  

If you cannot sell the loan then you have to write it off or write it down, and in the case of Diana Shipping RBS took an $80 million bath.  Now that has got to hurt.  Do a few of those deals and the Board of Directors will take the bank out of the lending sector.  My guess is that that has happened in coal also.  Cheers.

[Guillaume Albasini + 851]

Trump's support of the coal industry is not really changing the maps...

[markslawson + 1,061]

Coal in the US has been reviving of late due to demand from China - not that China is buying much US coal, but the additional demand has kept prices up sufficiently to keep the US producers competitive. Domestic US demand is still declining please note, due to gas - we're talking exports here. Trump's support for the industry has nothing to do with any of this, of course. That revival is the reason for the increase in lending. I don't know anything about promises by US banks not to lend to the coal industry, but such promises would be quite pointless on several levels. 

[HermitMunster + 146]

Coal isn't going anywhere. China is still building coal plants and even though their use is down, and any coal they are not using is being picked up by India as India is slated to grow 7% in '18 which is the most by far of any country. And they will use cheap coal to do it.

[TomTom + 183]

5 hours ago, HermitMunster said:

Coal isn't going anywhere. China is still building coal plants and even though their use is down, and any coal they are not using is being picked up by India as India is slated to grow 7% in '18 which is the most by far of any country. And they will use cheap coal to do it.

While that may be true in China, India and Vietnam, I doubt that worldwide negative sentiment in coal and bullish view toward natural gas will see coal's market share expand.

[TomTom + 183]

Next to that, if they (the coal mines/plants/projects) have improving cash flows... I don't see why a bank in a capitalist system wouldn't finance a coal related operation....

[HermitMunster + 146]

14 minutes ago, TomTom said:

While that may be true in China, India and Vietnam, I doubt that worldwide negative sentiment in coal and bullish view toward natural gas will see coal's market share expand.

Well, natural gas is the future, no doubt about it, but, it takes awhile to build pipelines, and LNG isn't that cost-efficient compared to coal and pipeline gas.