Most U.S. coal operators are constantly seeking ways to improve safety performance. Last year, mining fatality and injury rates fell to an all-time low, according to data recently released from the Mine Safety and Health Administration (MSHA). The fatal injury rate for coal mining was 0.0156 per 200,000 hours worked, and the all-injury rate was 3.38 per 200,000 hours worked, down from 0.0384 and 3.43, respectively, in 2010. President Obama didn’t take credit for the improved safety among U.S. mining operations, but he could have.
The most recent data from the Energy Information Administration (EIA) says that U.S. 2012 coal exports, supported by rising steam coal exports, are expected to break their previous record level of almost 113 million tons, set in 1981. Exports for the first half of 2012 reached almost 67 million tons, surpassing most annual export volumes dating back to 1949. U.S. coal exports averaged 56 million tons per year (tpy) in the decade preceding 2011. If exports continue at the current pace, the U.S. will export 133 million tons this year.
A report this month on the seaborne coal trade (See Coaltrans 2012, p. 42) identifies energy demand trends taking place worldwide. The mantra among coal exporters is increasing Chinese and Indian demand. Increasing demand from Europe is also expected to add buoyancy to the Atlantic Basin markets. Australia and Indonesia are coping with two different kinds of nationalism. Emerging export markets, such as those in Mongolia and Mozambique, are struggling with poor transportation infrastructure.
While it’s plain to see that year-to-date coal production is down -6.1% (See Top 10 U.S. Coal Producers, see p. 5), several of the largest U.S. coal operators believe that the industry has passed through the trough. U.S. coal demand rose sharply in the third quarter with a significant increase in cooling degree days, which helped to draw down stockpiles in the Ohio Valley. Natural gas prices have nearly doubled to more than $3.50 per million Btu (mmBtu). Peabody Energy believes PRB coal can compete with natural gas prices of $2.50 to $2.75/mmBtu, and the Illinois Basin is competitive at $3.25 to $3.50/mmBtu.
Assuming the politicians are able to work out an agreement by the end of the year that keeps the U.S. economy from careening off the fiscal cliff, the coal industry can expect a slight rebound in coal demand in 2013. The EIA now projects U.S. coal consumption to rise by more than 40 million tons in 2013. That’s following a year where coal production could drop by as much as 120 million tons.
In the meantime, coal operators must do what they need to do to remain profitable until the market approves appreciably. That means new projects will be tabled while the mines and plants focus on optimization and maintenance. There are some positive signs on the horizon. Try to cheer up and move past the election.