Coal companies buy out utility’s interest in Va. Terminal

Coal companies buy out utilityÆs interest in Va. Terminal With coal exports booming, three coal companies have bought out the interest of a utility in one of the country’s largest coal terminals in Newport News, Va.
   Richmond-based Dominion Resources has sold off its 20 percent interest in Dominion Terminal Associates (DTA) to three companies. Under the deal, the ownership stakes of the coal companies will grow as follows:
   ' Alpha Natural Resources from 32.5 percent to 40.6 percent.
   ' Peabody Energy from 30 percent to 37.5 percent.
   ' Arch Coal from 17.5 percent to 21.9 percent.
   The terminal, one of three in the Hampton Roads area, has annual capacity of up to 20 million tons of coal and it moved 7.5 million tons in 2007. It has already moved 3.7 million tons of coal in the first quarter of 2008 when 45 ships and 102 barges called at DTA.
   Throughput is expected to about double in 2008, said Charles Brinley, president of DTA. He noted that as the market has strengthened, both the size of vessels calling at the terminal and average shipment size have increased.
   DTA is a 100-acre facility with about 60 acres of land for ground storage of coal. Space is allocated to the owners according to their stake in the facility. Like the adjacent Pier 9 facility in Newport News owned by Kinder Morgan, DTA is served by the CSX railroad.
   On the other side of the harbor, Norfolk Southern operates the Lambert’s Point terminal, which has about twice the capacity of the DTA facility.
   Last year Lambert’s Point handled about 13.4 million tons of coal and Pier 9 handled 7.4 million tons of coal In the first quarter the two terminals handled about 4.6 million tons and 2.4 million, respectively.
   Last year, U.S. coal exports jumped 19 percent to 59.2 million short tons from 49.6 million tons in 2007. Metallurgical coal exports were up 17 percent to 32.2 million tons while steam coal rose more modestly, up 3 percent to 27 million tons.
   At DTA, most of the coal that the company handles is metallurgical coal for export, followed by steam coal for the domestic market, and steam coal for foreign buyers.
   U.S. exports in the fourth quarter of 2007 were 17.1 million tons, which the U.S. Energy Information Administration (EIA) said was “driven by a second consecutive quarter of particularly tight global coal markets.”
   It noted that U.S. exports have rebound from exceptionally low levels earlier this decade.
   After averaging about 22 million tons in the 1980s and 1990s, quarterly coal exports fell to roughly 12 million tons per quarter earlier this decade, the EIA noted, and bottomed out a 8.5 million tons during the first quarter of 2003.
   EIA said U.S. domestic demand for coal now and in the future makes it unlikely that exports will reach their earlier highs any soon, if ever.
   But it said production declines in some of the world’s major exporting countries as well as high prices in other countries brought about by particularly high demand increased exports in the fourth quarter of 2007 for the third consecutive quarter.
   “Since the first quarter of 2007 U.S. coal exports have increased by more than 53 percent,' EIA said in its most recent quarterly report on the coal market. 'In addition, the export share of total U.S. coal production increased to 5.8 percent during the fourth quarter, the highest export share in more than seven years.
   “Global coal markets are tight mainly because Australia, the world’s largest exporter, as well as other exporters such as Colombia, Venezuela and South Africa, have experienced port infrastructure failures or production problems, both of which have contributed to lower exports.
   “At the same time, the demand for steam coal to fuel new power plants and industrial plants such as cement manufacturers as well as for metallurgical coal to make coke for steel blast furnaces has continued to grow in China, India and other parts of Asia,” the EIA added.
   “This situation was exacerbated when China, which has historically provided Asia with a significant amount of coal, became a net importer of coal for the first time in early 2007, in part due to its growing demand for coal and in part due to the costs and logistics involved with transporting coal from its inland mines to its coastal consumers.”
   The EIA also noted the weak dollar has made U.S. coal cheaper than coal from other exporters. It said the relative prices being paid by foreign consumers around the world and in Europe in particular “have become so favorable, that U.S. eastern coal producers have been exporting a greater amount of their coal abroad.”
   The average price of U.S. steam coal exports increased from $51.35 per short ton paid during the third quarter to $52.72 per short ton during the fourth quarter, and the average price of U.S. metallurgical coal exports increased from $87.99 per short ton to $90.19 per short ton during that same time.
   The companies said their allocation of export capacity at the Dominion terminal will grow with their increased ownership stakes.
   Peabody said its share of capacity at the Newport News Terminal will “grow to approximately 6 million to 7 million tons annually. This is just one of several initiatives Peabody is pursuing to increase its global coal throughput as demand for seaborne coal continues to grow.”
   Alpha said the deal increases its coal export and terminal capacity from about 6.5 million tons to 8 million tons annually.
   “Strategically this move should further secure our position as the largest exporter of high-quality metallurgical coals from the United States to the world’s steel industry,” said Michael J. Quillen, Alpha’s chairman and chief executive officer.
   Arch noted that according to the 2007 B.P. Statistical Review of World Energy, coal has been the world’s fastest growing fuel source during the past five years.
   It said it expected the growth in coal demand to continue, primarily driven by expanding economies in coal-consuming Asian nations and in the United States.
   In 2008, Arch estimates that global coal demand will outstrip supply by 25 million to 35 million metric tons, and expects this supply deficit to grow through 2010.
   Arch forecast U.S. coal exports in 2008 to increase by another 20 million tons over last year’s strong market levels. ' Chris Dupin