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US exports to China may double

DEPRESSED domestic demand and lower freight rates could lead to a perfect storm resulting in twice the level of US export coal to China this year.

Donna Schmidt
US exports to China may double

At least, that is the view of Xcoal Energy and Resources chief executive Ernie Thrasher.

Based on annualized numbers, Thrasher told Reuters China could get as much as 12 million tonnes of American output in 2012, which in turn could have an impact on already waning coal prices in Asia where US and Colombian coal stockpiles were well fed.

“We only have data for January and February now but all anecdotal evidence so far suggests that there are no signs of that diminishing as the year goes on,” he said, adding that exports were about 5Mt in the first two months of the year while thermal coal shipments rose more than 5% over 2011 to about 3Mt.

“I think there is enough demand in Asia to absorb enough US cargoes to stem a decline in prices.”

Thrasher confirmed the trend of many US coal sellers who were taking an “outside of the box” approach to marketing export coal.

With Asia’s market shrinking and Europe following suit, American marketers are taking non-typical avenues.

At a recent Coaltrans conference in Beijing, Thrasher also said the US was turning to Asia because domestic demand was sluggish.

“Demand for thermal coal in the US has been crushed or eliminated and the current regulatory environment is really pushing utilities to move away from thermal,” he reportedly told attendees.

Xcoal, a top US exporter that exported 9.66Mt in 2010, said there was some skepticism on prices.

“But the margins can still work if producers sell the higher calorific cargoes, which can help increase the margins because the sale price will be higher,” Thrasher told the news service, though he declined to confirm if the company was a party in any deals.

According to Reuters data, Panamax vessel freight leaving the US Gulf of Mexico for China is averaging about $US50 a ton while Cape sizes originating in the east coast are ranging between $38 and $40.

The free-on-board price for producers, subsequently, is about $64 per tonne.

Coal's share of monthly generation in the US dipped below 40% last November and December for the first time since 1978, according to recent Energy Information Administration data.

The agency forecast coal demand by utilities would drop about 5% in 2012 to 884 million short tons, its lowest level in 17 years, thanks to a drop in natural gas prices.

China, meanwhile, is the world's top coal producer but was importing 182 million tonnes last year – an 11% year-on-year increase.

The share of that coming from the US was 4.9 million tonnes, or about 3% more than 2011.

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