US to become a major exporter of coal in 2008

Commodity Online

NEW YORK: Steady demand from utilities and surging global demand for coal will push up prices of coal in United States, the one fossil fuel the country has in abundance.

United States is all set to become major exporter for the first time ever since 1990 s thanks to the vast reorganization of global coal trade.

Coal has long been a cheap and plentiful fuel source for utilities and their customers, helping to keep U.S. electric bills relatively low.

With global demand rising for coal, it is becoming another hot global commodity, with domestic buyers having to compete with buyers from countries such as Germany and Japan.

Environmental concerns have forced some U.S. utilities to cut back plans for coal burning power plants.

The prospect of electricity prices shooting up in USA with in a three year period cannot be ruled out if domestic prices of coal were to rise.

Coal and utility executives predict that coal will remain the most economical fuel in years to come. Any significant rise in coal prices could have an important inflationary effect, because coal is used to produce about half the nation's electric power and it is vital in steel production.

Meanwhile, new coal fired power plants have been discouraged by the administration because they they feel it will contribute to greenhouse gas emissions.

The U.S. will export 7 percent to 8 percent of its coal production in 2008, up from about 5 percent last year, analysts said. Because of higher prices, the value of coal exports should double to $3.75 billion.

U.S. exports of coal grew from 49 million tons in 2006 to about 55 million tons in 2007, according to estimates, while domestic production increased by 1 percent. Exports are likely to touch 80 million tons this year.

Coal executives say that they expect exports to reach 80 million tons this year, and with railroad and port improvements, to rise to as much as 120 million tons in the next few

Meanwhile, imports of coal are decreasing gradually as producers in Colombia and Venezuela turn to markets other than the United States for higher prices. The shifts are further tightening supplies of coal in the Eastern United States, where stiffening regulations and various mine closings have limited output in recent years.

England, the country that used its vast coal stocks to pioneer industrial development in the 18th century, has become a major coal importer in recent years.

Meanwhile, India is building huge coal plants that will require growing imports, while Russia is using more and more coal to make natural gas available for export.

The falling dollar has contributed to US coal exports, which makes U.S. coal cheaper on world markets. But there are longer term reasons for the world to turn to the U.S., which has 27 percent of the world's coal reserves, more than any other country.

China is building a series of coal fired power plants. The nation is consuming so much coal that its ability to export is curtailed it is expected to become a net importer.

Major exporters such as South Africa, Indonesia and Vietnam are cutting back for a variety of reasons, including growing domestic needs and local power shortages. Recent flooding in Australia has cut exports, for a short while and an earthquake closed a major mine in Germany.

Meanwhile, India is building huge coal plants that will require growing imports, while Russia is using more and more coal to make natural gas available for export.