UPDATE 1-More US coal moving to Asia - market sources

Mon Jul 7, 2008 8:09pm BST

Quotes

   

(Adds details, adds byline)

By Bruce Nichols

HOUSTON, July 7 (Reuters) - More U.S. coal is moving to Asia, including the first Utah coal and the first whole cargo of Powder River Basin coal through Westshore Terminals at Vancouver, Canada, market sources said Monday.

Utah coal has never before moved through Westshore, the largest dry bulk terminal on North America's West Coast, and Powder River Basin has shipped there only as part of a blend, said Denis Horgan, terminal general manager.

Coal analysts have been watching for increased movement of U.S. coal to Asia as prices soar in a booming, coal-hungry market. Asian demand coupled with delivery problems in exporting countries has made U.S. coal attractive.

"It's because there's such a shortage in the world market now," said John Hanou, vice president of Hill & Associates, a coal consultancy. "It tells you how desperate people are."

David Khani, manager of energy research at Friedman, Billings, Ramsey investment bank, predicted more cargoes will move from unusual origins to non-traditional destinations. "We're seeing inventories around the world depleted," he said.

Prices for steam or power-plant-grade coals have moved past $140, from less than $50 early last year, while metallurgical or steel-making coals have sold for well over $300 a ton, triple prices of last year.

The prices of the deals moving through Westshore were not disclosed, but PRB is sub-bituminous and lower in heat content than bituminous coals, so it sells for around $10 a ton in the United States.

The Utah coal is coming from Consol Energy's (CNX.N) Emery Mine in Utah and is part of a deal for 750,000 short tons sold to an Asian buyer and announced earlier, Consol spokesman Tom Hoffman said.

One cargo already has moved, and a second will move "very shortly," Horgan said.

The Emery coal is bituminous and is being blended with coal from another source to be sold as a steel-making coal, Hoffman said.

He did not disclose the destination or the buyer.

The Powder River Basin (PRB) sub-bituminous coal is coming from Rio Tinto Energy America's Spring Creek mine near Decker, Montana, market sources said.

A person familiar with the PRB market said the coal is going to South Korea to replace Indonesian power-plant-grade coal, which is comparable to PRB.

Rio Tinto could not be reached immediately for comment.

"Never, ever, has Utah coal gone through here before," said Horgan. "The rail rate is prohibitive, and it can only happen in a high-price scenario."

The Utah mine is more than 1,600 miles from Vancouver, making the haul one of the longest ever done for export coal in the United States, Hanou said.

PRB also is a long way from Vancouver, but the coal has moved through the terminal in the past as part of a blend, analysts said. (Editing by Christian Wiessner)