Bloomberg News

Daiichi Chuo Targets U.S. Coal Export Boom, Shares Surge

February 01, 2012

(Updates with closing share price in fifth paragraph.)

Jan. 25 (Bloomberg) -- Daiichi Chuo Kisen Kaisha, a Tokyo- based shipping line, said it’s targeting a boom in coal exports from the U.S. as shale gas production frees up the fuel for sales overseas. The shares jumped the most in three years.

“Exports of coal from the U.S. could easily double in the next three or four years,” Saburo Koide, president of the company, said in an interview in Tokyo yesterday. “We’ve already had several inquiries on shipping coal from there,” he said, declining to name potential customers.

The shipping line plans to add an office in Brazil as early as next month to handle imports to South America, expanding its overseas branch network that includes China and India, Koide said. The U.S. can boost coal exports as much as 110 million tons by this year as low natural gas prices erode the fuel’s domestic demand, the International Energy Agency said last month.

“We’re going to see more bulk ships traveling to the U.S.,” Koide said. “China and India are already strong markets for coal. Brazil is also expanding.”

Daiichi shares climbed 19 percent, their biggest gain since December 2008, to 135 yen at the close of trading in Tokyo. The Nikkei 225 Stock Average rose 1.1 percent.

Shale Rock

The development of shale gas reserves in the U.S. is reducing the country’s reliance on coal for power stations, opening the way for the fuel to be exported. The U.S Energy Department forecast coal’s market share for power generation will decline to 43.5 percent this year from 44.9 percent in 2011, according to Simmons & Co. International.

Marcellus shale rock formation, stretching across the U.S. Northeast, has enough reserves to meet the nation’s gas demand for about six years, according to estimates from the Energy Department. Global coal demand may expand 2.8 percent a year to 2016 amid demand from emerging economies, the Paris-based International Energy Agency said last month.

“Demand for coal from developing countries is increasing as their populations and economies expand,” Koide said. Daiichi already has won some contracts to transport coal from the U.S., he said.

Daiichi plans to expand its fleet to 280 ships by the end of March 2016, from 195 vessels in March, according to the company’s mid-term forecast. The shipping line plans to add 111 vessels including capesizes and panamaxes in this period.

In comparison, Mitsui O.S.K. Lines Ltd., operator of the world’s largest merchant fleet, had 917 ships at the end of March, according to its annual report. The shipping line is the largest shareholder of Daiichi with a 26 percent stake, according to data compiled by Bloomberg.

Daiichi will make a loss of 3.8 billion yen ($49 million) on sales of 148 billion yen in the year ending March 31, the company said in October. It’s scheduled to announce earnings for the third quarter on Jan. 31. Koide declined to comment on the company’s earnings forecast.

--Editors: Vipin V. Nair, Suresh Seshadri.

To contact the reporters on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net

To contact the editor responsible for this story: Vipin V. Nair at vnair12@bloomberg.net


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