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China's Entrance into U.S. Coal Market Could Bolster Local Industry
Thursday, September 10, 2009 8:44 AM


(Source: Daily Press)trackingBy Peter Frost, Daily Press, Newport News, Va.

Sep. 10--NORFOLK -- The Maddalena D'Amato sluggishly pushed away from Norfolk Southern's Pier 6 in Norfolk Wednesday evening, weighed down with 75,000 tons of pure Appalachian coal.

Shipped to Hampton Roads by rail and offloaded at the coal docks at Lambert's Point, the metallurgical coal was dumped by giant cranes into the large holding basins of the Maddalena and destined for steel-producing factories in mainland China.

It's not an unusual scene in Hampton Roads, the largest coal export port in the United States -- it shipped out more than 36 million tons in 2008.

But the ship's destination -- Tianjin, China -- is more than a bit unusual.

"In my 32 years, I've never shipped a load of met coal to mainland China," said David Host, president of Norfolk shipping agency and brokerage T. Parker Host Inc. "This is a historic shift."

After the Maddalena, China has ordered at least eight more vessel loads through the end of 2009, each capable of carrying about 75,000 tons of American coal.

Metallurgical coal, or met coal, is used primarily as a fuel in smelting iron ore to make steel. This lower-grade coal represents about three quarters of all coal shipped out of Hampton Roads, according to figures from T. Parker Host, the region's largest coal booking agency.

Traditionally, most American coal is destined for trading partners in South America and Europe, the two nearest markets. But strong demand from Asia spurred by stimulus packages and a resurgent building boom has sapped international supply.

It's a trend that has caught much of the industry off-guard, especially in a year when the international coal market has been depressed amid a worldwide economic slowdown.

In the first half of 2009, mining companies around the globe have slowed production, idled equipment, laid off workers and even closed mines in response to low demand.

But within the last three months, China has gone on a spending spree, snapping up all available supplies from major coal producers in Australia, Canada and beyond, said Jim Thompson, the managing editor of Coal & Energy, a daily newsletter based in Knoxville, Tenn.

The last remaining market to tap was the United States, Thompson said.

China's move to order several hundred thousand tons of U.S. coal "is an unheard-of move, when you consider the distance the ship must travel to deliver," he said. "This came completely out of the blue. Nobody had any indication that this was going to happen."

The additional orders from Hampton Roads will help prop up an industry that was decimated in the first half of the year.




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