PORTSMOUTH, Virginia, Nov 12 (Reuters) - Predictions U.S. coal imports would wither amid skyrocketing world prices turned out to be wrong, and continued import growth now appears certain, experts said on Wednesday.
That’s because the recent roller-coaster coal markets — driven by see-sawing world supplies — have taught the biggest coal buyers the need for supply diversity, a utility executive said.
The same world market shift sent exports of eastern U.S. coal soaring, making it harder for eastern utilities to get the coal supplies that were instead flowing to overseas markets.
“When we see that kind of thing, we think we need to react,” said Ed Roarty, commercial fuels director for Virginia Power Energy Marketing. “The most important part of our business is keeping options, keeping choices,” Roarty told a coal conference sponsored by the McCloskey Group.
Another reason imports must grow is long-term fundamentals, experts said. U.S. electricity demand continues to grow. Key eastern coal supplies are in decline, and area utilities will need coal, which generates about half of U.S. electricity supply.
U.S. coal imports, 36.3 million short tons in 2007, will fall 1.5 to 2 million tons this year, but that is much less than the 5 to 20 million tons of decline predicted as recently as late 2007, said New Jersey coal trader Frank Kolojeski.
U.S. imports should rebound to 35 million tons by 2010 and reach 40 million tons by 2015, Kolojeski said.
South American coal, in particular, should become more competitive because dry bulk freight rates have plummeted as the economy has slowed. The cost of booking a Handimax ship, which can carry 35,000 and 60,000 metric tons, has plummeted to $8,000 a day from $64,000 this summer, he said.
U.S. coal import capacity has expanded in recent years due to expansions by utilities, coal companies and terminal operators from the U.S. Gulf Coast around the Atlantic Coast.
Kinder Morgan’s KMP.N Pier X at Newport News, Virginia, has sat idle as import markets did not develop as rapidly as predicted in the past two years. A new terminal in Charleston, South Carolina, has also been underutilized.
But at the Waterson Terminal Services terminal in Providence, Rhode Island, coal imports have grown since 2001, said Bruce Waterson, the company’s chief operating officer.
Near Portsmouth, the Chesapeake Energy Center operated by Dominion Resources Inc. (D.N) has added a pier to unload coal directly from ships, and Electric Authority in Jacksonville, Florida, is importing the bulk of its coal from Colombia.
“If there is spot demand in the United States, particularly for plants near the coast, they are as likely to be served by imports as domestic coal,” said Howard Gatiss of Coal Marketing Co (USA) Inc, the marketing arm for Colombia’s Cerrejon mine. (Editing by Marguerita Choy)