(Reuters circulated the following story by Jacqueline Cowhig and Bruce Nichols on December 7.)
LONDON/HOUSTON — A potential boom in U.S. coal exports to Europe could slow if bottlenecks at U.S. railroads and ports hinder deliveries, sources on both sides of the Atlantic said this week.
“Everybody’s talking some very big numbers for U.S. coal exports, but there seem to be be real problems with the logistics – rail and port capacity,” said one European trader. “I think it remains to be seen how much can actually find its way to the European market next year.”
A source at a U.S. coal producer agreed rail and port operators face challenges fulfilling export contracts.
“Port and rail capacity is currently very tight,” he said. “Railroads are struggling with current volumes and are attempting to increase capacity. It would be very difficult to have a sudden surge in volume. A slow gradual increase may be possible if pricing remains strong.”
A spokesman for CSX Corp., a large operator of rail and export terminal capacity, said concerns are misplaced because adjustments have been made that will satisfy demand.
“We really have adequate capacity to handle these things,” spokesman Garrick Francis said.
European buyers were not as confident.
“U.S. railroads are notoriously fickle,” said one European market source. “If I was a buyer in Europe, I’d be a bit concerned about delivery.”
Analysts predicted U.S. steam coal exports to nations other than Canada and Mexico could double from 10 million tons to 20 million tons next year, with most of the increase going to Europe.
U.S. metallurgical coal exports also are growing, but not as fast, and a spokesman for Norfolk Southern railroad, a major handler of met coal, said it anticipates no big problems.
European demand for U.S. coal has surged before only to fade quickly. The United States has been a swing supplier when traditional European supplies fail due to market shifts or logistical problems, experts say.
U.S. coal exports peaked at more than 100 million tons in the early 1990s but fell to less than 40 million tons in 2002. Analysts expect 50 million tons to be exported this year and more next year.
“The coal export market is very strong right now,” said Francis, the CSX spokesman.
But adjusting personnel, equipment and operations to meet a surge in exports takes time and money, and U.S. coal exporters may not have enough of a window to justify big expenditures, said Frank Kolojeski, managing director of Transglobal Ventures, a trading consulting firm.
So, the possibility of problems is real, Kolojeski said. “A Yo-Yo type environment is the most difficult to plan for,” he said.