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The state-owned railroad's revenues will be slashed by some $4 million annually now that Usibelli Coal Mine Inc. has lost its contract with South Korea-based Hyundai Merchant Marine Co. Ltd.
The railroad had forecasted coal-hauling revenues to rise from $3.8 million this year to $4.2 million in 2006, or about 5 percent of its freight earnings overall.
The loss in revenues from coal will mean less maintenance on the railroad's line from Anchorage to Seward, said Patrick Flynn, the railroad's spokesman. No jobs will be lost at the railroad, but there won't be the amount of work as before.
"There will be less trains to be driven so we would be calling engineers less to drive those trains," Flynn said.
"We're not happy about it," he said.
Nor are the coal miners in Healy, where the mining company has laid off a third of its 120-person work force since spring. The last of the layoffs came in August, said Steve Denton, Usibelli Coal Mine general manager.
"All the going-away parties have been sad," said Denton. "We can't hold on to jobs that are not supportable."
The dozen jobs at Seward's coal terminal, owned by Hyundai and the state, are in limbo, said Shelli Knopik, terminal office manager.
Knopik said Hyundai officials from South Korea are slated to come to Seward this month to talk with workers.
"It's real nerve-wracking," Knopik said. "We have no idea what the outcome will be."
The Alaska Industrial Development and Export Authority in 1995 invested $6.9 million to help lower the costs of the Seward terminal. Hyundai still owes $5.6 million on the loan, said Jim McMillan, AIDEA deputy director for credit.
"We don't know what's going on there," McMillan said. "We have not heard from them as to what may or may not happen."
McMillan said Hyundai is current with payments on the loan, which is due in 2005, McMillan said.
AIDEA, which owns 49 percent of the facility, will get its money back, McMillan said.
"We are protected," he said.
Hyundai officials did not return telephone calls from the Journal.
Usibelli announced in late March that it couldn't renew Hyundai's South Korean coal export contract, which represents nearly half of its 1.5 million ton annual production. The company has shipped some 12 million tons of coal to South Korea since 1984 and has been the only mine in the United States exporting coal to the country.
Usibelli in January was underbid by two coal suppliers in Indonesia, which has grown from being virtually a nonplayer in the world export coal market 20 years ago to the third largest today. China and Australia are the only two countries that export more coal than Indonesia to markets in the Pacific Rim, Denton said.
"Coal is prevalent throughout the world as an energy source, so it's difficult to ship it very far and compete," Denton said.
"We can't match their price," Denton said of the Asian coal exporters. "It's a fundamental economic gap that we can't cross at this moment."
Usibelli still has a steady market within the state for power generation in communities and military installations. Shipping revenues from those operations should earn the railroad $5.75 million this year, according to railroad projections.
The only potential Outside market now for Alaska coal is the Lower 48's West Coast, said Denton. But it's a long shot and is not being seriously considered.
It is, however, worth entertaining as a possibility, Denton said.
"It would be half as far from Alaska to the West Coast as it would be from Indonesia," Denton said.
The United States is a major importer of coal, but to ship it from Alaska to domestic markets would require a U.S.-flagged vessel under federal commerce rules. There are no such ships in existence.
"Without a (large) vessel, it would destroy all of our advantage," Denton said.
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