The recession, mild weather and concerns about impending climate legislation led to a drastic drop in demand for coal last year, but demand is trending upward as foreign demand for steel increases. Coal companies are scrambling to keep pace with demand for metallurgical coal used by steel mills as both U.S. and foreign steel markets rebound, Jeffrey Tomich of the St. Louis Post-Dispatch reports. Domestic steel mills are running at 73 percent capacity after slipping below 40 percent in 2008. Asian mills, which never dropped as steeply as U.S. ones, are running at full steam.
"Met coal is literally red hot and in short supply globally," Arch Coal CEO Steven Leer told Tomich. Increasing output of metallurgical coal has been difficult with declining reserves in the Appalachian Mountains and recent closures of several small Chinese mines. "Eventually, recovering demand collides with a decline in production and can create a shortage," Paul Forward, a coal analyst at Stifel Nicolaus & Co., told Tomich. The shortage has resulted in a sharp increase in metallurgical coal prices.
Demand for U.S. metallurgical coal will increase by almost one-third to 69 million tons this year with most of that production being sold to Europe, Asia and South America. "Arch, Peabody and Patriot have all announced plans to take advantage of rising prices by maximizing output," Tomich writes. Increasing metallurgical coal output was complicated by last month's West Virginia mine explosion that killed 29 miners. The Upper Big Branch mine was projected to ship around 2 million tons of coal this year, almost all going to steel production. (Read more)
No comments:
Post a Comment