Appalachian coal piles up for lack of buyers, depressing prices; Massey looks to exports

In a dramatic shift from last year, coal mines in Central Appalachia are suffering from a surplus of their product. It is being piled along roads and waiting for buyers and renegotiated contracts. Rebecca Smith and Kris Maher of the Wall Street Journal report that several coal and utility companies are already feeling the effect of decreased demand, anticipating as much as a 20 percent drop in sales by the end of 2009. "Unfortunately, coal has suffered the full brunt of this economic recession," said Steve Leer, CEO of Arch Coal Inc., the nation’s second-largest coal operator. Arch has delayed shipments and joined the likes of American Electric Power Co. and steelmaker ArcelorMittal in renegotiating contracts, the Journal reports.

Matt Preston of the energy consultant group Wood Mackenzie told teh Journal that most current coal prices hover between $45 and $50 per ton compared to $175 a ton during the peak of last year’s coal boom, but in Central Appalachia, where coal is deeper and mining it is more labor intensive, most producers need at least $70 to $80 a ton to operate. (Read more)

Tim Huber of The Associated Press reported, "The chief executive of mine operator Consol Energy said Thursday rival producers are contributing to a glut of coal on the market by building stockpiles despite dropping demand for electricity. Power plants have enough coal on hand to operate for about 45 days, up from about 25 days a year ago, but some have up to 80 days' worth of supply, Brett Harvey said." The company said it plans to cut production more than planned. (Read more) However, Massey Energy CEO Don Blankenship told analysts last week that his company, the leading one in Central Appalachia, "sees opportunities to export more coal to Europe and Asia as global steel production and power generation are starting to pick up," Reuters reported.