Coal export boom feeds talk of US port expansion

By Bruce Nichols

HOUSTON, July 30 (Reuters) - Plans for a new U.S. coal terminal on the East Coast have been suspended, but expanding U.S. export capacity remains a hot topic due to booming world demand, industry sources said Wednesday.

At a conference in March, Houston-based Kinder Morgan (KMP.N) outlined a plan to export coal from docks at Baltimore, Maryland, but dropped the project after storms damaged the site, sources said. Kinder Morgan declined to comment.

"Kinder Morgan did talk about the possibility at Cartagena," said New Jersey-based trader Frank Kolojeski, referring to the international coal conference in Cartagena, Colombia, earlier this year.

There also has been talk about expanding shipments from the U.S. West and Gulf coasts.

Arch Coal Inc (ACI.N) Chief Executive Steve Leer last week told analysts that the U.S. West Coast can handle more exports, and Illinois state officials have proposed helping to finance additional Mississippi River capacity.

U.S. coal export capacity expansion is getting a closer look as shipments to Europe and booming Asia soar and other exporting countries face delivery problems.

U.S. exports, less than 50 million short tons two years ago, could reach 80 million tons this year and 100 million tons in 2009 or 2010, according to many estimates.

"The nameplate capacity right now is somewhere north of 140 million tons," said analyst David Khani of FBR Capital Markets.

But systems underused for years can require maintenance or changes to reach capacity, he said. "You don't know whether you can do it until you do it," Khani said.

Market sources said Kinder Morgan aimed to start exporting coal using existing docks and equipment at a steel mill site near Baltimore by the end of this year, hoping ultimately to move 2 million tons a year.

A severe windstorm in early June wrecked an existing crane the plan relied upon, and officials shelved the plan, sources said.

As for the West Coast, Arch Coal's Leer said he thinks the current trickle could grow to 2 million tons a year.

Leer did not name potential West Coast ports, but small amounts have moved out of Richmond, California, and market sources said Stockton, California, is another possibility.

California's biggest ports, Los Angeles and Long Beach, are less talked about because Los Angeles has closed its coal terminal and spare capacity at Long Beach is limited.

Some in the industry also are exploring opening up an export terminal in Oregon, an analyst said.