HOUSTON (Reuters) - The world coal shortfall will last at least two or three years and could reach 70 million tons next year, Arch Coal Inc
"In 2008, we estimate we're 25 to 35 million tons short across the globe," Leer told the Reuters Global Energy Summit in Houston. "We see that virtually doubling," he added, explaining later he meant by the end of 2009. World production totals about 6 billion tons annually.
Leer said the shortfall has driven recent price increases, with benchmark U.S. coals doubling in the past year to more than $100 a ton, but he declined to predict how high prices might go.
He forecast a strong market for at least two or three years, saying it will take at least that long to ease rail and port bottlenecks in Australia and electric power shortages in South Africa, both key producing countries.
"Delays in infrastructure improvements probably would tend to support a longer time frame," Leer said
Leer said he has been through several booms and busts in his 30 years in the oil and coal business but this one feels different to him.
"The world has never seen 2 billion people go through an industrial revolution, and we're witnessing it right now. It is changing everything. It is certainly changing basic commodity demands and flows," he said.
The United States is in a coal-fired power plant-building boom, despite recent cancellations, he said. "About 4 million tons of annual demand will come on line in 2008, and I think about 20 million tons in each of the next two years," he said.
At the same time, he said, several important coal basins are maturing, in South Africa, Poland and central Appalachia in the United States. "We're seeing some fundamental changes on the supply side," Leer said.
In the United States, Leer said the failure to build more power plants faster is going to put the nation at risk of electricity shortages within five years because demand growth is outstripping supply.
"It's not coal-fired power plants. It's power plants," he said, citing a North American Electric Reliability Council study published last November.
"Right now, over half the U.S. will cross below the 15 percent reserve margin in 2009," Leer said, warning of brownouts and blackouts. "If the economy would slow down appreciably more, I think that would delay that by one year. But it doesn't resolve the issue."
(For summit blog: summitnotebook.reuters.com/)
(Reporting by Bruce Nichols; Editing by Gary Hill)
