Coal may be a dirty word in the U.S., but Asia's growing
appetite for the fuel has triggered a boom in export-facility
investments on American shores, just as domestic demand for coal is
stagnating.
The U.S. Energy Information Administration estimates 2011
exports surpassed 100 million short tons for the first time since
1992, and some market watchers expect exports to top that this
year.
"I think the U.S. can do quite a bit more as far as being a
swing supplier" to the global coal market, said Michael Tian, an
equity analyst with Morningstar.
Higher sales prices in Asia and Europe have made sending coal to
those markets more attractive, while U.S. emissions regulations and
competition from cheap natural gas limit domestic demand.
Fast-growing China and India have been sucking up shipments to
fuel an expansion of coal-fired power plants, disrupting
traditional supply channels. South Africa -- a traditional exporter
to Europe -- has been sending more shipments to Asia, creating a
hole in the market that the U.S. has helped fill.
U.S. coal producers looking to gain direct exposure to the Asian
market have ramped up efforts to bring a major coal-export terminal
to the U.S. West Coast, where currently none exists. Though they
have run into protest from environmentalist groups, who say
increased exports would undermine efforts to phase out coal use in
the U.S., the companies remain confident they can complete the
projects.
Peabody Energy Corp. (BTU), the largest U.S. coal producer by
output, estimates it exported 6 million tons of its total 2011
production of 203 million tons.
Vic Svec, a spokesman for the St. Louis company, said Peabody's
exports from the U.S. nearly doubled in 2011. "And we expect that
number to increase" in 2012, he said.
Historically, U.S. exports were limited to Appalachian
steel-making coal going to Europe. But Svec said demand has risen
for power-plant coal from the Midwest, Colorado and the Powder
River Basin in Wyoming and Montana.
For now, Australia and Indonesia have been able to tap into
Asia's demand for such thermal coal, and analysts say competition
should increase from other countries such as Mozambique, Russia and
Mongolia.
Peabody hopes to push into the Asian market with the Gateway
Pacific Terminal in Bellingham, Wash. There, privately held
terminal operator SSA Marine, a unit of Carrix Inc., plans to build
a port in about four years that would be capable of handling as
much as 53 million tons of coal annually.
A few hours' drive down Washington's coast, Arch Coal Inc. (ACI)
and Australia's Ambre Energy Ltd. are working to turn the site of a
former Alcoa Inc. (AA) aluminum smelter in Longview, Wash., into a
coal terminal capable of initially handling 5.5 million tons a
year.
"There's enough players out there that everybody's trying to get
a piece of the pie," EIA analyst Diane Kearney said. "But (100
million tons) is still a pretty impressive number if the U.S. can
maintain it."
The EIA estimates exports in 2011 totaled 107 million tons and
will rise to 134 million tons by 2035 due to increased global
demand. Comparatively, total U.S. coal production was 1.08 billion
tons in 2010, the last full year of EIA data.
In the past 60 years, annual coal shipments out of the U.S. rose
above 100 million tons only six other times, which were spread out
across the 1980s and 1990s during short-lived spikes in demand from
Japan and Europe.
On the East Coast, Consol Energy Inc. (CNX) is expanding its
Baltimore terminal to accommodate 2 million more tons a year,
allowing it to ship out 16 million tons annually. The company's
exports rose 68% to 11 million tons in 2011 from 2010 levels.
Along the Gulf of Mexico, energy-infrastructure company Kinder
Morgan Energy Partners LP (KMP) signed deals to export more coal
for Alpha Natural Resources (ANR) and Arch in the last year. Kinder
Morgan said on Jan. 24 it would spend $140 million to expand its
export terminal in Houston.
Cloud Peak Energy Inc. (CLD), which focuses solely on the Powder
River Basin, said its exports grew 47% in the first nine months of
2011 to 3.7 million tons from the same period a year earlier,
chiefly out of Canadian terminals.
Tian, the Morningstar analyst, said the West Coast projects will
be in big demand when they open, but exports could eventually hit a
ceiling, as transportation costs will make U.S.-produced coal less
competitively priced than coal produced closer to major Asian
customers.
He said U.S. coal suppliers could eventually decide to expand by
buying international mines, as Peabody has done in Australia.
Still, he said steps by many U.S. coal companies to expand
internationally have seemed cautious so far.
"Down the road, I wouldn't be surprised at all if other
companies decide to acquire mines outside the United States," he
said.
-By Ben Fox Rubin and Matt Day, Dow Jones Newswires;
212-416-3108; ben.rubin@dowjones.com