(The following story by Kathy Adams appeared on The Virginian-Pilot website on November 14.)
PORTSMOUTH, Va. — The perfect storm of events that caused a surge in coal prices and international demand this year – and boosted activity at the port of Hampton Roads – probably will pass in 2009, predicted industry experts speaking at the U.S. Coal Imports and Exports conference this week.
Those conditions, including flooding in Australian mines, the weak dollar and transportation shortages, are not sustainable, said Ed Roarty, director of commercial fuels for Virginia Power Energy Marketing Inc., a subsidiary of Richmond-based energy producer Dominion.
As a result, coal exports from the United States, including from Hampton Roads, probably will slow next year, said Lloyd Kelly, president of Greenmont Energy Consulting.
Roarty and Kelly were among the speakers at the conference, which took place Wednesday and Thursday at the Renaissance Portsmouth Hotel and Waterfront Conference Center.
For the first time since the event started in 2001, the conference included coal exports, reflecting changes in the worldwide market, said Frank Kolojeski, managing director for TransGlobal Ventures Corp., which hosted the conference with The McCloskey Group.
If U.S. coal exports fall softly, they’ll return to normal levels during the next few years, Kelly said during his presentation. But in a sharp-decline scenario, coal exports could fall by more than 30 million tons next year, with prices also dropping by as much as $100 per ton, he said.
The weak global economy also has the potential to erode coal demand, said Mark Liin-amaa, a vice president and mining analyst at Morgan Stanley.
That could have major consequences for Hampton Roads’ three coal-export terminals, said Adam Anderson, executive vice president of Norfolk ship agent T. Parker Host Inc. Norfolk is home to Norfolk Southern Corp.’s Pier 6 at Lambert’s Point, and Newport News has Dominion Terminal Associates and Kinder Morgan Energy Partners LP’s Pier IX.
Those terminals and related businesses shored up their work forces, equipment and infrastructure this year to handle the boost in demand, Anderson said.
If the export growth “goes away and stays away long-term, I think some of those jobs are going to go away,” he said.
There’s also some fear that, as demand falls, utility companies and steel producers might walk away from the high-price coal contracts signed this year, Liinamaa said. But he said he doesn’t expect that to happen on a widespread basis.
At the same time, a cold European winter could result in a shortfall of steam coal, which is used to make electricity, and boost U.S. exports, the experts predicted.
If the global coal market shifts, it could mean new import business for Kinder Morgan’s new Pier X terminal, which has seen little activity since construction was completed early this year.
And coal transporters, including railroads such as Norfolk Southern, probably will continue to do well next year because they’ll make up for any export drop-offs with increases in shipments of domestic-utility coal, Kelly said.
“I think that transporters, people like Norfolk Southern, may in fact be in a good situation because they move the coal regardless of whether the price at the mine has dropped,” he said. “As long as the price is high enough at the mine to keep the business going, they still move the coal.”