With the dollar down, coal exports through Hampton Roads heat up

The weak dollar may spell trouble for other parts of the economy, but at the port of Hampton Roads, it has helped fuel an increased demand for coal exports.

Coal shipments through Hampton Roads are projected to increase 48 percent this year, from 28.3 million tons in 2007 to about 42 million tons, said David F. Host, president of T. Parker Host Inc., a Norfolk-based ship agency that works with many coal vessels. The projected surge would boost shipments to their highest level in about a decade.

Much of the additional tonnage is of so-called steam coal, the type used to fuel electrical generating stations, Host said. It's mostly heading to European power plants. The increased orders began arriving in the fall.

"It caught everybody off guard," Host said.

Increases are also expected in 2008 for the metallurgical coal used in making steel, the bulk of the coal handled in Hampton Roads, Host said. Severe flooding this month damaged the coal infrastructure in Australia, a major coal exporter. That may result in much more business for Norfolk Southern's Lamberts Point facility, according to the Coal & Energy Price Report newsletter.

Hampton Roads' three coal terminals and the two major railroads that serve them are adding staff and stepping up maintenance to handle the coal influx. Some terminal officials say demand is so great that they're turning away business.

"It's definitely a challenge," said Charles E. Brinley, president of Dominion Terminal Associates in Newport News.

Brinley said his terminal could move as much as 15 million tons of coal this year, double what it handled last year. To accommodate that cargo, he's hired eight additional workers, bringing the total to 68, with plans to add more.

Similar plans are in the works at the region's two other terminals, Kinder Morgan Energy Partners LP's Pier IX terminal in Newport News, and Norfolk Southern Corp.'s Pier 6 at Lamberts Point in Norfolk.

Officials with the Norfolk Southern and CSX railroads both said their rail networks are ready to carry more coal from Appalachian mines to Hampton Roads' coal terminals.

"We can easily staff up and handle whatever the world wants to throw at us," said Mark Bower, an assistant vice president with Norfolk-based Norfolk Southern.

Hampton Roads is the nation's top coal port. It began exporting Appalachian coal in 1883. In recent years, the port's coal shipments dropped to some of their lowest levels in decades, with annual volumes running in the low-to-mid-20-million -ton range between 2002 to 2006, far below the high of 65.5 million tons in 1991. Significant shipments of steam coal had not moved out of Hampton Roads for five years, Host said, owing to the economics of the worldwide coal market. However, several factors combined to change conditions recently.

Europe is unable to depend on additional coal from some of the countries it typically imports from, Host said. Those countries include Colombia, which is "about sold out," and Venezuela, which is politically unstable, he said. That comes as China continues purchasing vast quantities of coal, making less available in world markets. Also, high ocean shipping rates have helped make U.S. coal more attractive to European buyers, Host said.

Meanwhile, the weak dollar has lowered the price of U.S. coal to foreign buyers by 25 percent in the past few months, said Bill Watson, coal team leader with the U.S. Department of Energy's Energy Information Administration.

Total U.S. coal exports overseas may reach 80 million tons this year, Watson said, up from about 58 million tons last year.

Conditions could remain favorable for U.S. coal for years, Host said.

"We've always been a swing supplier. The Europeans have come when there are problems in other parts of the world, and then it comes and goes like that," he said, snapping his fingers. "All indications are this time it's going to be a minimum of two years."

But the global coal market rarely functions as expected. The boost in coal exports comes just as Kinder Morgan is completing the yearlong construction of its $58 million Pier X facility to handle coal imported from other countries. But the market for imported coal in the United States has since collapsed. Until circumstances change, the approximately 1,200-foot-long pier, capable of handling 9 million tons of coal annually, will sit idle, said Joseph P. DeMatteo, Kinder Morgan's Newport News manager.

"It gives us plenty of time to train and be prepared for when the market shifts," he said. "It's kind of hard to celebrate when you're not going to be using it."

Gregory Richards, (757) 446-2599, gregory.richards@pilotonline.com