Production down but industry active: NMA

THERE were plenty of revelations in the National Mining Association’s recent coal producer survey for 2007, including an overall decrease in production, a rise in exports and significant transactions by some of coal’s biggest players.
Production down but industry active: NMA Production down but industry active: NMA Production down but industry active: NMA Production down but industry active: NMA Production down but industry active: NMA

BHPB's San Juan mine, New Mexico

Donna Schmidt

Through the last calendar year, the nation’s coal production was 1.145 billion short tons, a decrease of 17.2Mt or 1.5% from 2006, according to the group’s preliminary figures. Eastern US coal made up 41% of the total while Western state production was 58.3%, or a respective 477.2Mt and 668.4Mt.

While West Virginia and Alabama production numbers were up, Eastern totals as a whole suffered a 2.8% drop in 2007. The west was won by top US coal producing state Wyoming as well as Montana, Colorado and Arkansas but the region’s overall total was down 0.5% year over year.

The NMA reiterated that it anticipates output increases thanks to a sharp increase in consumption and exports. Imports of coal will continue, and Western output will jump up while Eastern production will remain mostly flat.

The anticipated consumption rise is based on increased numbers across 2007, as a 1.5% jump – equal to 16.5Mt – to 1.128Bt was due in large part to higher utility utilisation.

Most of the nation’s coal output – about 93% – once again was earmarked for electricity generation, about 20Mt more than 2006.

US exports of coal were 59.2Mt, a rise of 19.4% as producers look for better prices from global buyers.

“As with many commodities, coal has been the beneficiary of the global rush for resources, and with the US dollar trading lower against most international currencies, US coal has become more competitive,” the NMA said.

“Flooding at Australian mines and transportation infrastructure constraints, China’s cold winter and South African power outages disrupted coal supplies worldwide, fuelling a new-found interest in US coal by international purchasers in 2007 and early 2008.”

Of that export activity, both metallurgical and steam coal saw growth. Metallurgical coal exports were 32Mt for the year, up 17% on a jump in international coking coal demand – particularly from Europe, South America and Africa.

Bituminous coal exports, meanwhile, were also up by 21.8% to 27Mt thanks mostly to larger shipments headed to Europe and Africa (primarily Morocco).

US imports, for the most part, saw little change year over year at 36.3Mt. Most imports to the nation’s shores originated from South America (nearly three-quarters from Colombia alone), Indonesia, Venezuela and Canada.

“Coal imports are not increasing at the rapid rate of a few years ago, and in fact, may decline as plants without direct water access are finding it less economical to purchase imported coal given rising global coal prices,” the NMA noted.

“With US coal port capacity nearing its limits, terminal expansions are in progress at some of the Southern Gulf and Atlantic Coastal regions. Coal imports currently account for about 3 percent of total US consumption, while exports account for 5 percent.”

Major transactions

Through 2007, some of the nation’s largest producers were at the bargaining table for acquisitions, sales and other activities. Last June, for example, Missouri-based Arch Coal sold its Mingo Logan Ben’s Creek complex in West Virginia to Cobra Natural Resources, a division of Alpha Natural Resources.

Later in the year, fellow Missouri operator Peabody Energy completed a spin-off of its West Virginia and Kentucky operations and assets to newly formed entity Patriot Coal. The move, it said at the time, allows for a greater focus on Peabody’s growth in the Powder River Basin as well as the Midwest and Colorado.

Just after spinning off, Patriot purchased the remaining 18.5% interest in a joint venture, Kanawha Eagle. Its strategic plans for expansion have continued into 2008, with the operator reporting in April that it would acquire Magnum Coal.

Just before the end of 2007, a milestone merger took place with Chevron Mining’s announcement it would combine its Pittsburg & Midway division with its Molycorp subsidiary.

In November, BHP Billiton would begin talks with Rio Tinto to purchase all of the latter’s shares; discussions on the plans are still ongoing after two rejected offers.

Two significant movements in coal were made last July, the first being Cleveland Cliffs’ completion of its acquisition of PinnOak Resources’ Pinnacle, Green Ridge and Oak Grove mines. At about the same time, Pennsylvania producer Consol Energy took over AMVEST Corporation, including its West Virginia Coal division and other assets.

Survey says…

The NMA collected data from the coal industry from producers across the nation and found that 43 controlling companies reported production in 2007, topped by Peabody Energy with 192.3Mt of output.

Taking second place was Rio Tinto Energy America (137.9Mt) and third was Arch Coal (128.1Mt). Rounding out the top five were Foundation Coal (71.8Mt) and Consol (64.6Mt).

The group also looked at the nation’s top five underground mines through the year. The top spot went to Consol’s Enlow Fork Mine in Pennsylvania (11.2Mt), and following shortly behind in second place was its sister and neighbour, the Bailey operation (9.9Mt).

Third place for 2007 was earned by another Consol complex, McElroy in West Virginia (9.7Mt), and the fourth and fifth spots were nearly neck and neck – Peabody’s Twentymile mine in Colorado (7.9Mt) and Foundation’s Cumberland Resources operations in Pennsylvania (7.3Mt).

For more information on the NMA’s survey report, including the nation’s largest reserve holders for 2007, its coal production outlook and the compiled results of its workforce age survey, check out the August edition of Coal USA Magazine.

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