After coal export surge, slowdown in Europe could act as a brake

Jul 16 - McClatchy-Tribune Regional News - Michael Welles Shapiro Daily Press, Newport News, Va.

In 2011 and so far in 2012, coal exports through Hampton Roads have surged.

The boom is in part because the commodity has been undercut by cheap natural gas domestically and in part because of demand from European countries that are relying more on coal to run their power plants.

For the first quarter of 2012 U.S. thermal coal exports to Europe jumped 48 percent, and exports of metallurgical coal -- used mainly to make steel -- increased 17 percent, according toU.S. Department of Energy data.

In Hampton Roads, coal exports through June 2012 rose 6.1 percent compared to an already strong first half of last year, according to a report prepared by shipping agent T. Parker Host and provided to the Daily Press.

But several business executives said there are some signs of concern on the horizon, with European economies in crisis and growth in China, a large importer of coal, predicted to be less robust than in recent years.

"We've had record shipments the last couple of months but I don't think you can really annualize those," said Mike Quillen, founder and former CEO of Bristol-based coal producer Alpha Natural Resources.

"Europe is our biggest market and it is slow," Quillen said.

He said slower growth in China has the potential to create problems for the U.S. coal industry because it could increase competion from other large coal exporting countries.

"China sucks up all the Australian coal and thereforeAustralia'snot over here competing with us," he said.

"The financial meltdown in Europe is having an impact on the production of goods and steel and even the consumption of power," said Mark Bower, group vice president for export, metallurgical and industrial coal marketing at Norfolk Southern, which operates the Lamberts Point coal terminal in Norfolk.

Bower said he's started to see some overseas buyers delay shipments of coal by a month, "and none of that's good."

"I hope we've found the bottom in coal price, but who knows?" he said.

David Host, president and CEO of T. Parker Host, which helps arrange coal shipments at coal terminals in Newport News and Norfolk, was more optimistic about the future for coal, and he said even if the pace slows down for exports 2012 will be a banner year.

Host said the U.S. is on track to record a 20 percent annual increase for coal exports.

"Do I really think we'll end up with a 20 percent increase? No," he said. "But if we end up with a 15 percent increase, that's pretty awesome."

And he said even if China ends up reducing its imports of coal, that could easily be made up for by another growing economy.

"We've been exporting to India, but the demand they're going to require is tremendous," he said, predicting the South Asian nation would eventually outpace China.