(The following story by George Hohmann appeared on the Charleston Daily website on January 30.)
CHARLESTON, W.Va. — Coal exports are booming and West Virginia’s coal industry stands to reap much of the gain, industry experts say.
Robin Chapman of Norfolk Southern said the railroad’s 2007 coal exports were up 25 percent from the previous year. “A lot of that comes out of West Virginia,” he said.
The West Virginia Coal Association says the Mountain State historically provides 50 percent of all American coal exports. Association President Bill Raney said the organization believes that percentage remains accurate — and could actually be higher.
“I feel we have a lot of coal moving east, to Baltimore or Norfolk,” Raney said. “I feel like a lot of it is coming from here. We’re a real source of exported coal because of the quality, the dependability. We’ve always been the majority state providing exports. I think that’s still the case.
“You have some fluctuation depending on what the metallurgical coal market is looking for,” Raney said. “You could have some coming from other places — but I still think we have a majority of the export business.”
Metallurgical coal is used to make steel. Steam coal is burned to generate electricity.
Chapman said that of the 16 million tons of coal Norfolk Southern exported last year, 99 percent was metallurgical.
“There’s a growing interest in exporting steam coal but that will continue to be a very small fraction of what we export,” he said.
Chapman said he doesn’t have any projections for this year although, “generally speaking, we expect exports to remain strong.”
As for capacity, “our situation is good,” Chapman said. “We have sufficient capacity to handle the demand we expect.”
Almost all West Virginia coal intended for export moves by rail, Raney said.
Robert Sullivan, spokesman for CSX Transportation — the other major railroad in the eastern United States — could not be reached for comment.
According to the U.S. Energy Information Administration, coal exports during the first nine months of 2007 totaled 42 million tons, up 14.3 percent from the same period a year ago. The 2007 figure includes 23.8 million tons of metallurgical coal, a 16.5 percent increase, and 18.2 million tons of steam coal, an 11.5 percent increase.
Several producers, including Massey Energy, have responded with plans to boost production — particularly of metallurgical coal. But steam coal producers are optimistic, too.
Brett Harvey, president and chief executive officer of Consol Energy, told shareholders in the company’s fourth quarter 2007 earnings report, “The international demand for our Eastern coal continues to gain momentum. In the past few months, we have signed several international transactions for high-Btu steam coal, with term lengths of two or three years, something we have not seen since the 1970s. With the strength of global coal demand expected to continue unabated this year, we could sign additional contracts for steam coal this year with durations of seven to 10 years.”
According to the Energy Information Administration, the biggest buyers of U.S. metallurgical coal are Brazil, Canada and Italy. Canada is by far the biggest buyer of U.S. steam coal, with The Netherlands and Morocco coming in a distant second and third, respectively, during the first nine months of 2007.
Most West Virginia coal destined for export is shipped through Norfolk, Va., or Baltimore. Of the 42 million tons of coal exported during the first nine months of 2007, the Energy Information Administration said 15.1 million tons were shipped through Norfolk and 5.4 million tons were shipped through Baltimore. Other major exporting ports: Detroit, 9.7 million tons; Mobile, Ala., 5.5 million tons; New Orleans, 2.6 million tons; and Cleveland, 1.8 million tons.
Raney believes about 20 percent or 32 million tons of the estimated 160 million tons of coal mined in West Virginia last year was metallurgical coal. He said more than half of metallurgical coal exports originate in West Virginia.
“I guess Alabama has some met coal they put in the export market,” he said. “Pennsylvania and Virginia have some. But we have the vast majority, and the lion’s share of that is apparently destined for export.”
The West Virginia coal industry is optimistic about exports because of a combination of factors “that all seem to be coming together,” Raney said. Those factors include:
* A weak dollar, which makes West Virginia coal less expensive to Europeans and Canadians.
* Flooding in Australia’s central Queensland coalfields, which has disrupted metallurgical coal production there. Asian countries dependent on Australian coal “will have to source that coal from someplace else,” Raney said. “It’s likely to be American sources.”
* Utility stockpiles, which need to be replenished.
* Increasing demand for electricity. “Coal is used to make 52 percent of the nation’s electricity,” Raney said. “The demand for electricity seems to be greater today than it was two years ago. The same percentage of electricity made using coal today means you have larger requirements.”
Raney said the coal industry is not a reliable bellwether of the national economy and it is often difficult to tell if the industry is ahead or behind national economic trends. Right now, he said, “the national economy is getting cautious. The coal and energy industry seems to be somewhat bullish.”