Pier work has coal piling up

European buyers wait while Consol replaces pilings in Canton

January 22, 2008|By Laura McCandlish | Laura McCandlish,Sun Reporter

At Consol Energy's terminal on the Canton waterfront, coal trains still arrive daily, dumping their load on a mounting stockpile that's now swollen to about a half-million tons. Beyond, on the Patapsco, a barge-mounted pile driver echoes like repetitive cannon fire, slamming 100-foot steel pilings into the river bed as the company races to make structural repairs to the port's largest coal pier.

The abrupt shutdown of the 1,300-foot-long pier early this month for emergency repairs all but halted coal shipments from the port of Baltimore, where it's the second-largest export commodity. But Pittsburgh-based Consol says it's on track to complete the repairs by early next month, reopening the flow of coal from Baltimore to Europe for use as fuel for power plants.

The disruption shouldn't have long-lasting effects, Consol officials said.

"It's just a matter of shuffling around shipping dates between our international and domestic customers," said Thomas F. Hoffman, a vice president with Consol, the largest U.S. coal producer by revenue.

"We still expect to ship the same amount of coal by the year's end."

The shutdown comes at a time of surging demand for coal as ravenous consumption in China and India strains coal reserves worldwide. In the third quarter of 2007, U.S. coal exports reached their highest level in nearly 10 years.

Baltimore's coal exports totaled 5.4 million tons during the first three quarters of 2007, compared with 4.2 million tons in the corresponding period of 2006. On the East Coast, only Norfolk, Va., exports more coal.

Consol Energy Inc. handled 98 percent of Baltimore's coal exports in 2006, according to company and port officials. Exports at the company's Baltimore terminal were at 6.9 million tons in 2007, up about 21 percent, Hoffman said.

The strong export market has helped push coal prices up worldwide.

In Consol's Northern Appalachian (Pittsburgh seam) region, the price has risen from under $45 a ton in early 2007 to more than $60 in recent days. Industry experts expect the strong demand to continue, especially because relative to oil, coal is cheap, even with shipping costs.

The shutdown of Consol's Baltimore pier rattled markets in Europe, sending the price up a few dollars a ton as buyers scrambled to find backup supplies.

"Anything that decreases the supply has an impact," said Rick Nida, spokesman for Linthicum Heights-based Foundation Coal Holdings Inc., which operates 13 mines and exports through the CSX-owned Chesapeake Bay Piers across the harbor.

"China has become a net importer of coal, which is now favorably affecting the export market for coal in the United States," Nida said.

28 pilings

As workers hammered in the first of 28 steel replacement pilings Friday, Regis J. Peternel, Consol's general manager, insisted the company would still meet its annual exports target in Baltimore.

"It's just going to be condensed into 11 months," said Peternel, touring the facility officially known as CNX Marine Terminals.

Consol is Europe's biggest supplier of steam coal imports used to produce electricity, accounting for more than 35 percent, said Jeremy Sussman, an analyst at investment bank Natixis Bleichroeder in New York.

Impact in Europe

Assuming repairs to the Baltimore pier are made on time, the impact of the shutdown will be limited to Europe, where prices rose a few dollars a ton as buyers scambled to find other supplies.

"The only ones going to be affected by this is Europe, because they're missing a month's worth of coal," Sussman said.

Multiyear contracts

Owning its own export terminal in Baltimore gives Consol a competitive advantage, helping the company to land lucrative multiyear contracts with European utilities, Sussman said. Consol has held the former Canton Piers terminal off Keith Avenue for more than 20 years.

More than half of the coal that Consol exports from Baltimore comes from the company's 20 mines, Hoffman said. The rest it processes for other companies.

By early February, Consol should have replaced the pier's rotted-out, part-wooden pilings and relaid track for its coal-loading equipment, Hoffman said. But he said bad weather could delay that effort.

Consol's stockpile yard - which can hold 1.3 million tons of coal - is nearly half full. One to two trainloads - each transporting between 11,000 and 13,000 tons of coal - still make deliveries to the terminal most days, Peternel said. But if repairs are delayed, Consol would have to redirect its outgoing coal to the domestic market, both Hoffman and Sussman said.

"If ... the port is not up and running within the month, that keeps more coal in the domestic market," Sussman said. "That would depress domestic prices slightly."

laura.mccandlish@baltsun.com

COAL EXPORTS

(Millions of tons)

.............. . 2007* 2006*

Baltimore 5.4 4.2

Norfolk, Va. 15.1 10.7

Eastern U.S. Customs District 21.6 16.3

Total U.S. coal exports (Jan.-Nov.)

2007 2006 2005

53.3 45.5 45.03

*First three quarters of the year

[Energy Information Administration]

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