London (Platts)--15Jan2008

The US is unlikely to make up for a shortfall in global coal supply even if it
ramps up its exports, according to the latest research from investment bank,
Merrill Lynch.

The rising cost of coal has made it profitable for US producers to sell into
Europe and as a result, exports increased in 2007. However, in a January 11
report, Merrill Lynch cited limited export capacity and insufficient railings
to East Coast ports as reasons why US coal is unlikely to provide much relief
to the European market.

"Even if US coal exports were to double this year to 20 million mt, they are
unlikely to put a lid on API [CIF ARA] coal prices as the API market also has
a strong link to the Pacific market," said the bank.

"Pacific plus European coal markets cover several billion metric tons of coal
annually; hence prices should not be shaken significantly by a 10 million mt
supply shock."

The bank said that international coal prices had surged by 150% in 2007 on the
back of record dry bulk freight rates, supply bottlenecks and soaring
coal-fired power generation in emerging markets.

"In our view, global coal prices could rise to new highs as the fundamental
support is still strong," it said.