Global market good for U.S. coal but maybe not in Appalachia; safety laws' effect on small mines cited

As China's demand for coal has begun to outpace its supply, other international markets are turning to the United States for coal, reports Matthew Dalton of Dow Jones Newswires. As China opens another coal-burning plant almost every week, it is importing more coal from Australia and South Africa. These markets normally serve Europe, and so consumers there will now rely on U.S. coal.

Companies producing coal used in making steel will see benefits first, especially because two major metallurgical coal mines have been shut down temporarily, Dalton reports. Most U.S. coal is used to make steam in domestic power plants, but as much as 58 million tons of both steam and metallurgical coal will be exported in 2007, which would be an 18 percent increase from the 49 million tons exported in 2006. As demand for both types grows, utilities' stockpiles of coal should dwindle.

"It's not affecting us yet," Deborah Rouse, manager of coal and transportation at Southern Co., one of the nation's largest coal consumers, told Dalton. "It's not affecting the U.S. market yet because of the inventory hangover. ... If the export demand continues, and domestic demand picks back up, then I think that just has upwards price pressure on the market."

For companies in southern West Virginia, Eastern Kentucky and Southwest Virginia, however, rising production costs could force some producers out of the market. In the Central Appalachian region, smaller underground mines have fueled production, but new safety laws are making small-scale mining more expensive, Dalton reports. "There's a big question mark on how much Central Appalachian production will drop out of the market because of that," John Hanou, a coal market analyst at the energy research firm Hill & Associates, told Dalton. (Read more)