MAC: Mines and Communities

Mining executives see coal slowly rebounding

Published by MAC on 2009-12-06
Source: Reuters (2009-12-06)

Mining industry gurus envisage a rebound for coal by the end of next year - with  increases in demand expected, not just from thermal power utilities, but also steel manufacturers.

However, at present - and with overall demand for the black stuff down by 10% this year - the market is in significant surplus (around 100 million tonnes), while huge optimism is being placed in rising Chinese demand, especially for metallurgical coal.

It is often forgotten that the global steel industry, followed by cement and aluminium manufacturers, comprise the world's second biggest industrial "bloc" consumers of coal. Ball-park estimates suggest that they are guilty of spewing out at least  7-10% of Global Greenhouse Gas emissions.

The Copenhagen climate change summit might seriously focus its sights on limiting use of thermal power.

But there's a risk that delegates will ignore the highly damaging consequences of allowing further unchecked carbon emissions by the metals and construction sectors - which, in some respects, are more difficult to control.

With global coal demand in relative recess, this would seem a good opportunity to challenge the notion that these sectors should continue depending on massive consumption of coal.

US mining executives see the coal market slowly rebounding

Coal demand and prices are moving upwards but inventories at US power stations are still higher than normal

Reuters

1 December 2009

NEW YORK - The coal industry is slowly rebounding from last year's recession with demand and prices inching upward, although inventories at U.S. power stations are still way higher than normal, U.S. coal mining executives said on Monday.

Demand from steelmakers for metallurgical, or coking coal was rebounding quicker, especially in Asia, but it would probably take another year for thermal, or steam coal used in power generation, to return to the levels before last year's economic downturn, said Kevin Crutchfield, chief executive of Alpha Natural Resources. "Met markets are moving and we see recovery for thermal in the not too-distant future," he told the Macquarie Group's metals and mining conference.

Talking of the past year in which demand and prices fell, Crutchfield said "there were times when we all wished it would all be over. But now we see things are turning and we are cautiously optimistic."

But he noted electricity generation is down 4% so far this year and probably will end the year 10% down.

"We appear to be recovering from the recession...but inventories are still too high. Some 100 million tons need to be taken out of the market place to get back to a range of 130 million to 150 million tons."

That is likely to occur "by the back end of 2010," he said in comments to the conference monitored via a webcast.

New coal-fired power plants coming on line should account for another 13 million to 18 million more tons of coal demand.

On the global coal market, Crutchfield said it could be summed up in one word -- China. Asian consumption was expected to increase to 8 billion tons from 6 billion tons in the next 20 years, he said.

China was now a net importer of metallurgical coal for its steel production which is expected to exceed 600 million tons this year -- roughly half the world's total steel manufacture.

Alpha, he said, has capacity to produce 13.5 million tons of met coal per year and planned to export about two-thirds of that production.

Victor Patrick, CEO of another U.S. coal producer, Walter Energy (WLT.N: Quote, Profile, Research) also noted the industry's rebound.

"While we had a period through this year where our ability to sell was constrained by the demand for our product, the customers weren't there, that is not the case anymore.

"We are back where we have historically been, where our ability to sell our product is limited by our ability to get the product out of the mine," he told the Macquarie conference.

"In terms of the supply side, we've also seen this dramatic shift in China's influence in the market, from being a net exporter...to being a net importer of coal.

"And of course, pricing outlook seems to be strengthening because of the supply and the demand factors," Patrick said.

A ton of eastern U.S. coal that sold for $45.13 six months ago, was selling for $48 on Monday, according to the industry newsletter, Coal & Energy Price Report. (Reporting by Steve James; editing by Carol Bishopric)

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