A torrid global market is squeezing domestic supply of high-grade coal as mining companies divert shipments to countries willing to pay much higher prices. That’s why U.S. coal exports should jump 39% in 2008 to 82 million tons, Stifel Nicolaus analyst Paul Forward tells the USA Today newspaper, even though prices for Appalachian coal have jumped from $46/ton last August to $140 this month,

If the shortage persists into next year, as expected, Seth Schwartz, a principal at consulting firm Energy Ventures Analysis in Arlington, Va., says customers will face another steep price increase — up to 70% to around $240/ton.

U.S. market supplies are tight because most of the exports are from Eastern mines, such as those in the Appalachians, which sell coal with higher energy content and are closer to Gulf of Mexico ports. Another 40% of U.S. production is from the more productive Powder River Basin, where per-ton prices are far lower–at about $13/ton–due to the coal’s lower energy content. Also, coal there can be extracted more easily from seams as thick as 100 feet vs. typical 3-foot seams in Appalachia.

Yet even Powder River coal is riding the export wave, with some heading to Europe and Asia and prices up 50% since last year. The supply crunch is delaying shipments, forcing utilities to scramble to keep coal-fired plants running. That’s why some companies, such as Peabody Coal, are sending a growing portion of the region’s coal to Eastern utilities to replace foreign-bound Appalachian coal.

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