No idle threat

A HOST of factors is leading miners large and small to idle some of their operations, creating something of a worrying trend for the industry. By Donna Caudill
No idle threat No idle threat No idle threat No idle threat No idle threat

 

Donna Schmidt

Mine idles – some have been by small companies, some large, and some have been partial while others are a permanent fate. No matter the scope, this negative trend can be traced back in many cases to a trio of factors: favorable gas prices, a continued flatness in demand and a US winter that was among the mildest in recent memory.

One of the latest idles at press time came just weeks before the Memorial Day holiday; the closure of Alpha Natural Resources’ Bee Tree and Twilight mines. Producing metallurgical and thermal coal, respectively, the idles in West Virginia sent about 130 workers to the unemployment line.

Alpha chief executive Kevin Crutchfield said production adjustments were part of the plan to cope with increased global supply and a geographically mixed demand picture for coal.

“In this environment, Alpha will remain focused on selectively pruning our portfolio, controlling costs and maximizing free cashflow generation,” he said.

In late April, it was Patriot sending pink slips to its crews. The producer put the brakes on operations at the Freedom underground thermal operation in Kentucky.

The closure of the mine, which produced 1.2 million tons last year, will have no remaining uncommitted Illinois Basin thermal coal for 2012 delivery.

Patriot executive vice president Bennett Hatfield said the step was taken to align production with committed sales.

The move to idle the mine was no surprise, as Patriot had already announced the idling of a handful of mines this year.

One of those was in February, and the victim mine was its Big Mountain operation in Boone County, West Virginia.

Officials estimated at the time that the complex could be up and running later this year pending market conditions.

In March, it was Alabama-based Walter Energy suspending operations, and again the impacted mine was in Appalachia.

The producer confirmed it would cut production at its Maple underground complex by 35% in the second quarter to help meet its margin ratios and respond to market demand – effectively idling the 60,000 metric tons per month high-volatile met mine for about 10 days a month.

However, if any silver lining was to be found in the news, it was Walter’s confirmation that it would retain most of the mine’s 230 employees for positions at other locations.

“We remain confident that production will be within the guidance provided for 2012 and we continue to take steps to optimize production at our highest-margin mines to help offset weakening global metallurgical coal prices,” chief executive officer Walt Scheller said.

“Walter Energy will continue to monitor market demand for high-vol products and may further adjust production to reflect market conditions.”

No company was safe from the economical stabs the markets were taking to the heart of coal country. Also in March, Pennsylvania-based Consol Energy announced not one, but two temporary longwall idles at its well-performing Buchanan operation in southwestern Virginia and Blacksville complex in northern West Virginia.

At Buchanan, the continuous mining operations were reduced to a five-day work week; at press time, longwall production was still suspended.

“Consol Energy is responding to market conditions primarily as a result of increased inventories and decreased international demand for its metallurgical coal,” it said, confirming that the shrunken schedule would result in an estimated production decrease of approximately 295,000 tons per month.

No one was laid off at the 778-worker Buchanan mine, but Consol confirmed that overtime and other non-essential work would be postponed.

It was the longwall at Blacksville that also fell victim to market conditions, though Consol said continuous mining crews would be reduced to a four-day work week.

The 585-worker mine will also retain its entire staff during the slowdown, resulting in a production shortfall of about 400,000 tons per month.

Blacksville No 2, in the Pittsburgh 8 seam, produced 4.3Mt with a single longwall and three continuous miners in 2011.

Buchanan had 4.5Mt of low-vol met output and 500,000t of steam coal production last year from its longwall and CMs, which extract from the Pocahontas 3 seam.

The question becomes: will there be more, and where will they be?

Also, will we see these eastern coalfield mines return to their former glory?

While some are predicting a shorter-term market recovery than others, it is really a case of wait and see?

This article first appeared in the June 2012 issue of Coal USA

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