Summary of Coal Industry in BUCY Feb CC
Timothy W. Sullivan, President and Chief Executive Officer of Bucyrus, a mining equipment manufacturer, summarized the coal industry’s current status in the following way:
“[Regarding] ... Asian ... coking coal. That inventory has not been worked down yet to replenishment levels. I did say that pricing has found its bottom, I believe that to be true, ... So we are reasonably bullish about the situation there as far as pricing being well above a cash cost to produce those commodities, which obviously bodes well for stabilizing the commodity producers and then hopefully our business as we move forward.”
“I think one positive that came out of the discussions I had last week in China is that the Chinese stimulus package seems to be hitting the mark, ... Their impetus and what they’re trying to achieve with the stimulus package is to continue with their infrastructure needs; roads, railroads, power plants, they’re all being built, nothing has slowed down as far as their infrastructural spend and they’re obviously trying to create stronger consumerism – domestic consumerism with their export markets faltering, not the least of which is the U.S. market.”
“The U.S. market is a little bit less certain .. power demand is off by about a percent and a half, but coal production is also off by a little bit more than a percent and a half, and this is obviously good, it just continues to show the discipline that we do have in the commodity market, not only internationally, but also domestically. ...Inventories are a little high on coal around the United States obviously because of the demand being down, but if production continues to be less than demand as we move through 2009, I see a stabilization of supply and demand on the coal side of the business.”
“... we had a very large booming activity in Central Appalachia, primarily due to the export demand that was generated by the fact that countries like India were importing a lot more coal from traditional suppliers of coal to the European market primarily South Africa. So as that South African coal started to move to India, it created opportunities for East Coast producers of coal and particularly in Central App and those mines were able to find some very lucrative export markets in 2008, we don’t see that happening in 2009. And I think that that will probably affect Central App more than any other region in the country. It could affect to a much lesser extent, but could affect Northern Appalachia mines as well ...”
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