Washington (Platts)--14Aug2007

Speculation that foreign steel makers could turn to the US to fill
metallurgical coal shortfalls may be moot, as current US supply might not be
sufficient to meet spot cargo demand, several industry sources said.

While demand remains strong, US met coal supply has not kept pace. The tonnage
available for spot tenders is limited, and prices remain high, they said.

A marketer for one US producer told Platts, "The US market is tightening up,
and there is no question of increased demand. We receive inquiries every day
from India, but we are not looking to commit tonnage to the spot market.

"There's been even more uncertainty [in the US market] since the recent roof
fall ? there's been a lot of confusion," he said. He referred to Consol
Energy's Buchanan mine, a 5 million-short-ton/year premium low-vol met coal
mine that has been closed since a roof fall on July 9. Consol recently said at
its second-quarter earnings conference that it is planning for the mine to
remain idle until September, but the company hopes to reopen it sooner (PCT
7/27). Workers continue to ventilate the mine to make it safe for re-entry, so
damages may be assessed. The underground mine is Consol's largest met coal
operation.

The problem also comes from the specs required by some steelmakers. "The
Europeans want coal that's just not available right now in the US ... they
want lower-pressure, higher-ash Alabama coal that's similar to Australian and
Canadian hard coking coal," he said. 

A marketer with another American met coal firm expressed a similar sentiment.
"Those in India, the Far East and Europe have all come to the US, but the high
quality tonnage just isn't here anymore. [Certain companies] that ended up
with surpluses after contract season have largely sold it off." 

Low-priced US deal raises questions 

One European trader told Platts that an offer to deliver to India from one of
his US clients had been pulled, as the supplier needed the coal to use for a
blend in contracted business. "That is an indication of how tight the market
is," he said. 

But he allowed that there might be other motives. "It is also perhaps a
strategy of suppliers to drive up the prices ahead of renegotiation of
contracts." 

-- Andrew Todd, andrew_todd@platts.com

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