U.S. coal exports to drop 15 pct in 2009
U.S. coal exports will drop by 15 percent and domestic supply will exceed demand in 2009, reversing recent trends, because of the global economic slowdown, an industry analysis said on Tuesday.
The report by energy investment bank Simmons & Co analysts led by Pearce Hammond predicted U.S. exports will decline from 75 million short tons in 2008 to 65 million tons in 2009.
“This will be due to a higher dollar, lower freight rates, improvements in Australia’s port capacity and lower met (metallurgical) coal demand,” the report said.
The analysts predicted total 2008 U.S. coal supply will exceed domestic demand by 2.3 million tons, reversing an earlier projection of shortage, and 2009 U.S. coal supply will exceed demand by 12.5 million tons.
Bottlenecks in Australian rail and port operations contributed to the run-up in U.S. exports from 50 million tons in 2006.
Lower ocean freight rates make other nations more competitive with U.S. exports.
The world financial crisis is weighing heavily on demand for coal in steel- and cement-making and as power-plant fuel, the report said.
Due to declining steel demand, the world metallurgical coal market will shrink by 70 million tonnes and seaborne met coal trade will fall 20 million tonnes in 2009, the report said.
The world met coal market was 769 million tonnes in 2007 while seaborne trade was 226.7 million tonnes in 2007, according to latest available data.
Prices for metallurgical coal used in steel-making will decline 50 percent by 2010 from the recent peak of $350 to $175 a metric tonne (1.1 short ton), the analysts said.
With demand and prices dropping, lower quality steel-making coal will migrate back to the steam or power-plant coal market, adding to available U.S. coal supply, the report predicted.
“Demand weakness is most pronounced in China as the country’s industrial production in Oct ‘08 grew at the slowest pace in seven years,” the Simmons analysts wrote.
With Chinese power demand softening, utility coal supplies there have increased from less than 10 days of supply in July to more than 20 days at the end of September, the report said.
In the United States, by contrast, power plant supplies average 58 days, according to industry data provider Genscape.
Tags: coal, exports