Coal shipments on inland waterways expected to pick up

Washington (Platts)--29Mar2007

Harsh February winter weather reduced coal shipments on the nation's inland
water system, but industry analysts are expecting coal shipments to pick up
this spring as utilities seek to add to their stockpiles ahead of the summer
peak coal-burning season.

Merrill Lynch analysts Jeff Fidacaro and Ken Hoexter said that the demand for
coal from the nation's utilities is expected to pick up at the end of April
following routine shutdowns of plants for maintenance ahead of the summer
season. In a March 28 report, they said that utilities try to have 45-50 days
of coal inventories into the summer, but were carrying about 39 days of coal
supplies as of the end of February.

The demand from utilities for coal shipments, along with improved operating
conditions on the rivers, will improve the outlook for barge operators,
according to the analysts.

In releasing a bullish outlook for barge operator American Commercial Lines,
Fidacaro and Hoexter said that they expect a rebound in the operator's coal
shipments during the second quarter. Coal accounted for 8% of transportation
revenues for ACL in 2006, according to the analysts.

The analysts said that ACL experienced overall volume declines as a result of
harsh February weather. Below-zero temperatures caused the Illinois River to
freeze over for more than two weeks and made it tough for barges to operate on
the Ohio River as well. But they noted that, as the weather warmed up in March
and conditions improved, overall ACL tonnage increased by 28% during the first
three weeks of March, compared with the year-ago period.

On the Great Lakes, coal trade was in "hibernation" through February as
maintenance work was being done on ships, but coal shipments started moving in
mid-March, said Lake Carriers' Association spokesman Glen Nekvasil.

On March 15, the Superior Midwest Energy Terminal loaded its first boat, but
the load was only 55,106 short tons, he said. The vessel usually loads 57,000
to 58,000 st, but low water levels and lack of dredging reduced the loading
capacity.

SMET President Fred Shusterich said in an e-mailed message that the terminal
is running on a regular shipping schedule and to date has loaded 10 vessels.
Detroit Edison receives about 8 million st/year through the terminal.

Nekvasil said that ice still remains an issue for Great Lakes coal traffic,
even as the weather has warmed up.

"Lake Erie coal shipments seem to have gotten off to a late start, but is that
[due to reduced] demand, I don't know," he said. "We had, and still have, some
pretty formidable ice on eastern Lake Erie, so that could have affected
shipments from Ashtabula and Conneaut" terminals.

Nekvasil said that, just like last year, he expects that low water levels and
inadequate dredging will make it hard to load vessels to full capacity. As a
result, it will be necessary for vessels to make more trips to carry the same
load of coal than when water levels and dredging is at normal levels, reducing
vessel operating efficiency.

-- Marcin Skomial, marcin_skomial@platts.com