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Analysis: U.S. to Be a Top Coal Exporter Again, Thanks to Asia

China, Asia and many countries in the developing world are turning to the U.S. to make up for coal supply shortfalls

By Bruce Nichols and Jackie Cowhig,

May 15, 2011
A coal belt in Seward, Alaska

The United States could vault back into the top rank of coal exporters for good this year thanks to Asia's fuel demand — just as surging gas output and tougher environmental laws threaten mainstay domestic sales.  

Leading U.S. producers, with wallets bulging from high world prices, are jostling to boost their Asian presence. 

 Their only problem is squeezing enough coal through over-stretched ports and railroads, but efforts are underway to open new outlets thanks to surging confidence in the sector.

"We see it as a structural change," said Deck Slone, chief spokesman for , the second largest U.S. producer after Peabody Energy Corp.

Arch has agreed to buy International Coal Co and has opened a Singapore-based subsidiary to boost its export presence.

Analysts say total U.S. coal exports could amount to around 100 million tons (91 million tons) this year, leaving only Australia and Indonesia above it in the world export rankings, and putting it above Russia, Colombia and South Africa.

 It exported 81.5 million tons in 2010. A short ton is 0.907 metric tons, the latter used in markets outside the U.S.

The economic boom in China and India has been the driver, but the developing world is also turning more to the United States to make up for supply shortfalls, particularly buyers who want very high energy-content U.S. fuel regardless of its high-sulphur content.

Miners in the U.S., the world's second-largest greenhouse gas emitter, have been hit by weak domestic coal sales and fear President Barack Obama's tough climate change policies will further cut coal demand.

"U.S. policy toward coal has been negative," said analyst David Khani of . "Add having extra natural gas and every coal producer wants to ship every ton they can out of the U.S."

The opening up of the export market puts them in a more profitable, long-term position.

U.S. miners are now rushing to open Asian marketing offices and to merge, amalgamate and expand their output with their eyes on the export prize.

Good Times

Annual U.S. coal exports have hit or exceeded 100 million tons only six times in the last 50 years. Exports have been sporadic depending on international prices and freight costs.

But world prices of over $100 a ton (more than $110 a ton) seem here to stay due to strong demand, logistical bottlenecks and slow export growth in major producers this year.

Increased U.S. exports are unlikely to bring prices lower, traders say, but will compensate for delayed coal from Australia and will be smoothly absorbed by the Asian market.

This could not come at a better time for U.S. coal miners who face slow-growing domestic consumption amid tough environmental rules and competition from plentiful, cheap, cleaner natural gas surging from new shale plays.

Optimism dominated analyst conference calls to discuss quarterly as coal company executives forecast historic shifts and big growth.

Arch executives noted that, while 35 gigawatts of U.S. coal-fired generating capacity, 11 percent of the total, could be shut down in the next 10 years, 249 gigawatts of new coal-fired power plants are under construction worldwide.

"This is going to require almost 800 million tons of new coal supply during this time period," Arch President John Eaves told investors.

Total seaborne thermal and coking coal trade in 2009 was 1 billion tons a year, according to the .

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