Talk of exporting U.S. coal to Pacific on the rise

HOUSTON Fri Feb 8, 2008 10:40pm GMT

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HOUSTON Feb 8 (Reuters) - With the world coal market roiled by supply problems, there is increasing talk of exporting U.S. western coal into the Pacific Basin.

Union Pacific Railroad UPN.N is exploring coal export opportunities through U.S. West Coast ports, a spokeswoman confirmed.

The Port of Long Beach, California, has had discussions about exporting coal in addition to the petroleum coke it already handles, a spokesman said.

The biggest coal port on the west coast of North America, Canadian coal-handling Westshore Terminals Ltd at Vancouver, British Columbia, has had inquiries, an executive said.

The biggest U.S. coal company, Peabody Energy Corp (BTU.N), acknowledged in its fourth quarter performance conference call considering exports to Asia from the U.S. West Coast.

Growing demand and delivery problems in key producing countries have realigned the world coal market in recent months, making U.S. coal more attractive overseas.

Eastern U.S. coal already is flowing to Europe, and prices for U.S. coal have been driven past $70 a ton on the New York Mercantile Exchange, nearly doubling in a year.

Talks and planning were described as preliminary and few details were available.

UP spokeswoman Zoe Richmond said, "It would be premature to comment until we have all the I's dotted and T's crossed."

Denis Horgan, vice president and general manager of Westshore, said the terminal has handled Wyoming coal in the past and that high prices are stirring new interest.

"We've had inquiries on Utah coal, a much higher BTU coal, which is even farther away," said Denis Horgan, vice president and general manager of Westshore.

In a quarterly conference call Jan. 31, Peabody Energy Corp (BTU.N) executives said they already have shipped some western bituminous coal to Japan through California.

But California port capacity would be limited, Peabody Chairman and CEO Greg Boyce said.

"If exports were to significantly ramp up directly out of the West Coast, then the port of Vancouver would have to come into play."

UP serves Long Beach and other ports on the west coast, from California to Oregon to Washington.

"There is some ongoing discussion about getting coal through here," Port of Long Beach spokesman Art Wong said.

Storage barns used for pet coke at Long Beach are full, so accommodation would have to be made, he said. In the past, coal trains parked nearby, but neighborhoods complained, he said.

"I heard they were going to send a test shipment to see what other pieces (of the puzzle) are missing," the Long Beach spokesman said.

Any plan to expand coal-exporting facilities at Long Beach beyond existing capacity probably would raise environmental questions, Wong said.

The other big West Coast port, Los Angeles, has quit the coke export business, partly because of community environmental opposition, Port of L.A. spokesman Gordon Smith said.

"The port is in the process of demolishing its old coke export terminal and would not be receptive to getting involved in that business again," Smith said. (Reporting by Bruce Nichols; Editing by David Gregorio)

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