Bluefield Daily Telegraph
Even a casual observer would likely notice that the flow of coal through the Norfolk Southern Railway’s normally busy Bluefield yard has slowed considerably this summer. Even record hot spells in the heavily populated eastern United States haven’t pushed up the demand for domestic thermal coal, and the international markets for metallurgical or steel-making coal appear flat compared to five years ago.
Most of the coal that passes through the NS Bluefield yard headed east is going to NS’s port operations at Lambert’s Point in Hampton Roads, Va. It’s been that way since 1883 — 130 years in all. Five years ago, the metallurgical coalfields of southern West Virginia and southwestern Virginia were riding a high tide of global growth that was fueled in part by an economic growth spurt in China and some unpredictable weather-related challenges in other met coal exporting countries.
In 2008, the total of coal exports from West Virginia and Virginia combined amounted to 32,458,000 short tons of coal — more than half the 56,702,000 short tons mined in all 11 eastern states, and well ahead of the 66,267, 000 short tons in the 13 coal-producing states in the west. Those figures continued to climb each year through 2011, when the two Virginias exported a combined total of nearly 46 million short tons of coal. That trend has not continued.
“Coking coal demand and prices reached record price levels during 2008 mainly because of China’s dramatic increase in production of steel in recent years and demand for coking coals,” according to Homeland Energy Group Ltd., report. “Coal prices hit around $360/$380 per metric ton in mid-2008, (up) from around $140/$160 per metric ton in the previous 3/4 years.” The report indicates that the price has dropped because of the decline of the surge in China and other countries.
“The markets are very, very tight right now,” Rick Taylor, president of the Pocahontas Coal Association said. “The costs of mining coal is up and the price of coal is very competitive among our competitors,” he added, making reference to other global coal-producing countries. “There’s more coal on the market now than is being consumed.”
Taylor said that typical free market forces work to bring coal prices down when supply is high and demand is low. He said that present prices for metallurgical coal are about one-third of the price that coal was bringing in mid-2008. At the same time, he said the present price for coal is three times what it was in 1998.
“I am often asked how much coal is left in the United States, and I respond that it’s a function of the price of coal,” Taylor said. He explained that during periods of high demand for coal, operators can mine coal in thin seams that might have been too costly to have mined when coal was fetching a higher price.
“The coal business has a history of being cyclical,” Taylor said. “During the past few years, we have been able to rebuild our workforce and put a lot of talented young coal miners to work. The economy is down right now. I hope it’s not down too long.”
NS reported last week that second quarter coal revenues were 17 percent lower compared with the same quarter in 2012, “the result of a combination of reduced global demand for U.S. coal and competition from natural gas,” according to the NS report on second-quarter 2013 earnings.
— Contact Bill Archer at email@example.com