Coal

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As Oil Prices Rise, Nations Revive Coal Mining

By MARTIN FACKLER
Published: May 22, 2008

The New York Times

BIBAI, Japan — These rugged green mountains, once home to one of Asia’s most productive coal regions, are littered with abandoned mines and decaying towns — backwaters of an economy of bullet trains and hybrid cars.

Japan’s coal country is stirring again. With energy prices reaching record highs — oil settled above $135 a barrel on Thursday — Japan’s high-cost mines are suddenly competitive again, and demand for their coal is booming. Production has jumped to its highest in nearly four decades, creating a sensation rarely felt in these mining communities: hope.

“We are seeing a flicker of light after long darkness,” said Michio Sakurai, the mayor of Bibai, on Japan’s northernmost island of Hokkaido. “We never imagined coal would actually make a comeback.”

Soaring commodity prices have had distorting effects across the global economy, driving up food prices and prompting fears of future energy shortages. But they have been an unanticipated boon to the coal producing regions of countries like Japan that had written off coal mining as a relic of the Industrial Revolution.

In Bibai, once a thriving cultural center that had a ballet troupe and five cinemas showing first-run Hollywood movies in its heyday in the 1950s, the population shrank to 27,800, from 92,000. As mining jobs evaporated, they left behind rows of abandoned clapboard-fronted stores that give some neighborhoods the air of a ghost town.

While Japan’s coal industry remains tiny, its revival is an example of how higher commodity prices are driving a search for resources even in some of the world’s most urbanized and developed nations.

In recent months, South Korea has experienced calls to create a domestic coal industry in order to reduce dependence on imports. In the United Kingdom, where coal’s decline became a symbol of withered industrial might, companies are increasing production and considering reopening at least one closed mine as demand for British coal rises.

“It’s now the perfect storm with demand for our coal from South Africa to China and Australia,” said Rhidian Davies, president of Energybuild, an operator of mines in South Wales that will increase production at one of its mines tenfold over the next five years.

In Japan, higher commodity prices have also unleashed soaring demand for the heavily populated nation’s other limited natural resources, including lumber and natural gas, where production has risen nearly 20 percent this year to a three-decade high.

But coal is the most potentially plentiful fossil fuel in Japan, and companies have been quick to embrace now affordable domestic supplies out of deep-rooted anxieties about Japan’s heavy reliance on imported energy.

While there are no national figures yet, mining communities report sharply higher production in the last two years. For example, in Bibai the city’s last two mines, both small strip mines, produced just 34,961 tons of coal in 2005. This year, they expect to surpass 150,000 tons, the highest production since 1973, when the city’s last large underground mine was shutting down.

For decades, Japanese coal, at $100 or more a ton, was simply too expensive because of high wages and extraction costs. But with global prices now reaching the same heights, Japanese coal is looking more attractive.

The price of power-station coal shipped from Newcastle, Australia, settled at $134 a metric ton for the week ending May 16, from a high of $142 for the week ending Feb. 15. In May 2003, the price was $23.25 a metric ton.

The utility company Hokkaido Electric Power announced it would nearly double purchases of domestic coal this year to 110,000 tons, while Mitsubishi Materials, a cement maker, said it would buy domestic coal for the first time in 18 years.

Demand is so high that one of Bibai’s mine operators, the Hokuryo Corporation, is now scouting a second mine to double its output.

But the industry’s long decline has made it difficult to gear up. There are almost no geologists left in Japan specializing in coal, or recent surveys of coal deposits in the region. To conduct its search, Hokuryo is relying on a stack of torn, yellowed maps hand-drawn by company geologists more than 40 years ago.

“Our predecessors braved the bears in the woods to leave us these maps,” said Fumihiro Yamamoto, the Hokuryo mine’s director.

Other changes in the last four decades could also hamper efforts to increase production. Hokuryo and other companies say they can no longer build large underground mines because no Japanese worker would want to work in such dark and dangerous conditions today.

At the same time, environmental regulations prevent most strip-mining, which creates huge open pits that can be eyesores. There have been proposals to raise production using new, untested technologies like pumping in water or heat to liquefy coal so it can be sucked it out of the ground like oil.

Even if such technologies worked, no one is expecting Japan to become self-sufficient in coal anytime soon. Domestic coal production contributes only 0.8 percent of the total coal consumed by Japan. Still, there is enormous potential: Sorachi, the region that includes Bibai, sits on an estimated six billion tons of coal, enough to supply Japan’s current level of use for 30 years.

“I don’t think we can expect a dramatic increase in the near future” in domestic coal production, said Hirofumi Furukawa, general manager of the Japan Coal Energy Center, an industry-affiliated research group. “But still, it is good to have a rare bit of encouraging news.”

Japan’s coal industry needs cheering up: nationwide, production is down from its peak in 1961 when 662 mines yielded 55 million tons of coal. Last year, eight mines produced about 1.4 million tons, according to Mr. Furukawa and Japan’s economy ministry.

Japan’s hard-hit coal mining communities have sought ways to cope with the industry’s long decay. The town of Yubari, an hour east of Bibai, went bankrupt after building an extravagant amusement park, the Coal History Village, which failed to attract tourists.

That does not mean coal is a savior. In fact, so far the coal revival has failed to produce new jobs in Bibai’s mines, where machines now do most of the digging. Many residents doubt a real renaissance is even possible. Much of the city’s population is in its 70s or older. Some doubt that working-age people who left when the mines closed will ever want to come back.

“Even if a few young people come back, it won’t be enough to save this town,” said Mitsuko Michiyama, 69, who owns a clothing shop on an empty shopping street where most storefronts are boarded up.

Still, business is looking up for Hokuryo, a unit of the Mitsubishi Corporation that once operated vast mines producing a million tons of coal a year and employing 8,000 workers.

Today, it employs just 40 at its single remaining strip mine.

The mine had survived by supplying about 30,000 tons a year to Hokkaido Electric, which bought the coal in order to support a local industry. Then, starting last year, the mine began receiving calls from other potential buyers. This year, it has promised to deliver some 120,000 tons of coal, far beyond the mine’s initial projected output of 50,000 tons, said Mr. Yamamoto, the mine’s director.

With its half dozen bulldozers and power shovels digging full-time, the company has had to turn down a half dozen would-be buyers.

“It’s frustrating,” said Mr. Yamamoto, who has witnessed the industry’s decline after he started working 36 years ago in one of Japan’s last big underground mines. “It was so hard for so long, and now we refuse big customers.”

At the mine, an open pit cut into a mountainside above Bibai, the mood is noticeably upbeat. Workers say they are working every day of the week, which was not the case even last year.

“We’re all really thankful,” said Takeshi Sasaki, who wore a hard hat as he checked one of the conveyers that wash and sort newly unearthed coal. “If this keeps going, it will mean a whole new era for Bibai.”


http://www.nytimes.com/2008/05/22/business/worldbusiness/22mines.html?em&ex=1211601600&en=85620cd23467121b&ei=5087%0A