Alliance is focusing on the Illinois Basin and Northern Appalachian coalfields, which Craft sees as growth regions, particularly the IB. “For the IB, we see production of 115 to 120 million tons this year,” he said. “We think it has an opportunity to grow another 20 million tons over 2013-2014, with most going to the U.S. steam market, but some going to the export market as well.” About 110 million tons were produced in the IB in 2011.
For the three months ended March 31, Alliance earned $83 million, compared to $95.3 million a year earlier. The company enjoyed a healthy increase in coal sales revenue, rising 5.4% to $429.6 million.
Alliance did set one record during the latest quarter—for production. Its 8.5 million tons represented a 3.5% jump over a year ago.
Craft acknowledged the coal industry faces challenges, not the least of which are extremely low natural gas prices that hovered around $2/mmBtu in the spring. That has led some electric utilities to switch from coal to gas, causing coal’s share of domestic electricity generation to fall below 40% for the first time in years.
Craft, though, predicted that gas prices “have hit their bottom and will be going up in the future.” As a result, “We don’t anticipate in the 2013 timeframe, or even 2012, any further gas switching. When you get beyond that, a lot will hinge on the election in 2012,” a reference to the race between President Barack Obama, a Democrat, and his likely Republican challenger, Mitt Romney. Many in the industry accuse the Obama administration of waging a “war on coal,” especially through new pollution control regulations by the Environmental Protection Agency and heightened enforcement by the Mine Safety and Health Administration.
Craft said he sees the thermal export market continuing to evolve in the latter half of this year. In addition to the European market, “We’re seeing interest increasing in the Asian market as well as India,” he said. “There is increased activity. As we look at 2013, we don’t see any reason why the demand appetite would not continue. We believe it will continue…world demand for coal continues to be at a strong pace, contrary to what we’re seeing right now in the United States.”
In the U.S., he said, coal demand has “pretty much flattened out, and we’ll have a sustained 800 million to 900 million ton burn in the U.S. for the next 10 to 15 years.”