Replies to post #1267 on Coal

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Coal industry group predicts lower production

Coal industry group predicts 4 percent production decline due to weak economy
Thursday February 19, 2009, 6:29 pm EST

CHARLESTON, W.Va. (AP) -- The National Mining Association is predicting U.S. coal production will decline 4 percent this year. Hal Quinn, president of the industry group, blamed the anemic U.S. economy in a speech to the West Virginia Coal Association on Thursday. Preliminary government figures show U.S. production totaled 1.17 billion tons in 2008.

The Washington, D.C.-based trade group expects electricity demand to dip less than 1 percent this year as industrial customers scale back. Quinn says electricity demand is expected to grow 1.3 percent in 2010 as the economy rebounds.

As a result, production of utility coal is expected to dip 1.2 percent. Production of coking coal for firing blast furnaces is expected to fall 11 percent due to plunging demand for steel.

Quinn says exports likewise are expected to drop 11 percent. Soaring international demand pushed exports up 38 percent in 2008.

http://biz.yahoo.com/ap/090219/coal_production_outlook.html?.v=2

[Xplosivestocks]

SOCI could be sitting on a huge coal bonanza

Lota Bay Coal Mine Exploration in Chile
March 12th, 2009 Lota was a major coal-mining centre in southern Chile, situated on the Golfo (gulf) de Arauco. Although the city of Lota was founded in 1662, sustained development of coal mining did not begin until 1852, when the industrialist Matias Cousino started a coal-mining enterprise. Completion of a railway from Concepcion, 32 km north, in 1888 stimulated growth. In the 1990’s Lota’s coal resources became exhausted and cheaper Colombian coal began to compete in the market causing the coal mines to close after 145 years of continuous operations.

Over the 145 year span of Lota coal mine operation, many tons of coal was dumped or spilled into the harbor. Most of the spilled coal resulted from primitive shipping and conveying practices that were in use over the last 145 years.

In March 2006 a drilling test was performed in this area. The net results of these tests show 275,000 proven tones of recoverable bituminous thermal coal in the harbor with probable reserves of 90,000 tons. The coal within the boundaries of the concession is a layer averaging 2.26 meters in thickness in 10 meters of water with 1.7 meters of overburden.

Ms. Latapiat acquired the rights to remove the Lota coal through a Minor Maritime Concession On A Section Of The Sea Floor from the Chilean Government on August 20, 2008. As outlined above, Southern Energy has entered into an agreement with Ms. Latapiat to acquire this interest.

The operational plan is to dredge up the coal and process it in an adjacent industrial site. Lota has grid power, water, sewage, road and rail access. The coal will be marketed to nearby coal burning thermal electric generating plants which currently have to import to meet the growing electrical demands.

The projected economics is based on the current price for coal in Chile of $60 per ton. This price reflects the demand for coal in Chile as 84% of Chile’s electrical production is from coal fired generation plants. At a median price of $60 per ton, the gross value of the project is $21.9 million, and with dredging and recovery costs of approximately $30 per ton, the gross profit is $11 million for the two year operating period

[Democritus_of_Abdera]

Coal Outlook per Joy Global’s Jun 2009 CC

JOYG depends upon coal mines for purchase of its heavy equipment; it watches the coal industry carefully. JOYG’s statements regarding the current and near future state of the coal industry in its recent June 3 CC were:

US coal production could be down 9% from last year. If so, it would be the largest reduction in coal consumption since 1954 and the largest drop in coal production since 1958. This would require taking 90 to 100mm tons of production offline, of which around 70mm tons have already been announced. With quick production cuts matching demand decline, JOYG expects US coal prices to stay above the average cost of production, but not by enough to justify expansion.

JOYG expects natural gas surpluses in the US to deplete rapidly without drilling, and drilling requires gas above $7. This equates to Central Appalachian coal prices above 70 to $80 per ton coal.

China has increased its imports of metalurgical coal significantly as part of its rebuilding of steel inventories. Sustained demand from China for copper, iron ore and met coal will require significantly increased exports or a stronger recovery in the domestic markets. This level of demand is unlikely to develop soon. Consequently, the need for metalurgical coal in China is likely to be short lived.

China has a renewed emphasis on mine safety trigged by a large mine explosion that killed a number of miners in the Shanxi province. Shanxi province just shut down all of their mines until they go through safety inspections. That’s been a fairly torturous process. Many of those mines won’t be able to pass the safety regulations and won’t come back on-line. In China, about half the country’s coal production is produced by these small mines. On the other end of the extreme the large, state-owned mines, have been expending rapidly, but they have not been able to grow fast enough to offset the impact of closure of the small mines for safety violations. There are more pressures on the provincially owned and some of the mid-tier mines to increase their production in China.