Easter Regional Coal Production Down 14 Million Tons, Executive Says

Easter Regional Coal Production Down 14 Million Tons, Executive Says

A string of recent mine closures has cut at least 14 million tons of production from eastern coal mines, an executive with Pittsburgh-based Consol Energy said Thursday.

But the cutbacks represent a relative drop in the bucket for the coal industry. Mines east of the Mississippi River produced more than 493 million tons of coal in 2005, according to the U.S. Energy Information Administration.

Still, the drop in production is a sign that the current coal boom is ebbing.

Consol recently idled its Shoemaker Mine in Marshall County, trimming four million tons of annual production, Vice President of Operations Ronald Stovash told more than 100 people at the Bluefield Coal Symposium. Consol, the nation’s largest underground coal producer, plans to reopen the mine in early 2009.

Other companies have trimmed production another 10 million tons by idling mines, Stovash said. Richmond, Va.-based Massey Energy Co. and Scott Depot, W.Va.-based International Coal Group recently announced plans to idle all or parts of their mines. Canonsburg, Pa.-based PinnOak Resources recently laid off 200 miners at two mines in Pineville and a third in Alabama to balance production with market needs.

Stovash said layoffs by private companies probably push total production cuts beyond 14 million.

The shutdowns come in reaction to declining spot prices for coal and high costs, particularly for diesel fuel. Warm weather last winter and a relatively cool summer have kept demand for electricity low, leaving utilities with larger than usual stockpiles of coal, which is used to generate more than half of the country’s electricity.

“We are now beginning to see a supply response,” Stovash said.

Spot prices for Central Appalachian coal have fallen from nearly $65 a ton last summer to about $49 per ton this fall, according to the EIA. Northern Appalachian coal prices have fallen from about $45 a ton at the beginning of the year to $39 this fall.

Despite the short-term bad news, Stovash said construction of new power plants and the promise of converting coal to diesel, jet and other transportation fuels give the industry a bright future.

“In the long term, however, I believe the outlook for coal is good,” he said.

Shares of Consol rose 31 cents to close at $31.61 on the New York Stock Exchange. Massey shares slipped 4 cents to $20.86 and shares of International Coal fell 10 cents, or 2.3 percent, to $4.20, also on the NYSE.

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