RPT-ANALYSIS-U.S. coal production unlikely to sate world demand

(Repeats to add dropped word "million" in third paragraph)

By Bruce Nichols

HOUSTON, June 16 (Reuters) - U.S. coal production has room to grow, but expansion is unlikely to meet surging world demand because miners fear a boom-bust cycle, key reserves are declining, and regulation has tightened.

Despite soaring prices, the U.S. Energy Information Administration has cut projections of U.S. output rather than raised them, and now foresees a total of 1.166 billion short tons by 2010, barely up from a record 1.163 billion in 2006.

That is not enough to overcome what some coal officials see as a shortage of 25 million to 35 million tons this year in the 6-billion-ton world market and a shortfall of perhaps 70 million tons next year.

Closing the gap with U.S. coal would require spending billions of dollars to expand mines, rails and ports, investment difficult to recover if -- as has happened before -- supply growth exceeds demand and prices fall.

Europe has bid spot eastern U.S. power-plant coal past $110 a short ton, up from $45 a year ago, because booming Asia has bought up other supplies Europe had relied upon. But there has not been much of a U.S. supply response.

"No one is really ramping up production dramatically," said Daniel Scott, director of equity research for the investment bank Dahlman Rose & Co.

"The weakness in this sector has often been the companies tend to overproduce when they get a sniff of good pricing, and they kill their golden goose," Scott said.