Sept. 27 Wall Street Journal excerpt on met coal mine closures that belies CEC the glass is full marketing pitch.
Now, the Chinese economy is slowing and so is its steel industry. That has sent the price of coal used for steelmaking down nearly 50% to $170 a metric ton. Those coal producers who counted on Chinese sales are reeling.
"When someone had coal to move, China was your big box store," said Ernie Thrasher, chief executive of XCoal Energy & Resources, a major U.S. marketer of such coal to Asia. This year, "the switch went off."
While many have blamed the downturn in the U.S. coal industry on cheap natural gas supplanting coal and tougher environmental regulations, the slide in metallurgical coal demand has been equally devastating.
Coal companies were caught flat-footed after ramping up production last year with the expectation that steep prices would cover their rising costs, despite coal's past cyclicality.
Instead, demand in China began to falter just as Australian metallurgical coal production -- interrupted by floods last year -- surged back into the market.
In July, . of St. Louis filed for bankruptcy protection, shortly after it lost a contract for coal bound for an Asian steelmaker. Patriot's stock slid 18% the day after it announced that news, taking other coal stocks down with it. Earlier this month, Patriot said it would temporarily idle metallurgical coal operations at three mining complexes in southern West Virginia and lay off 250 miners, in addition to 1,000 layoffs earlier this year. On top of that, Patriot has said it will need to reduce "unsustainable" pension and health benefits to 2,000 miners and some 20,000 retirees and surviving spouses.
China's metallurgical coal imports dropped to 2.6 million metric tons in August, from an average of 4.5 million metric tons per month through July. Now coal mines are closing throughout Appalachia. Earlier this month, Alpha Natural Resources Inc., of Bristol, Va., which derives a large share of its profits from metallurgical coal, said it was cutting 1,200 jobs, or 9.2% of its workforce. Earlier this year, Alpha laid off more than 700 miners and trimmed production at more than 20 mines. Consol Energy Inc. of Pittsburgh, which sells more coal into China than any other U.S. producer, earlier this month idled the nation's biggest metallurgical coal mine, which employs 620 miners. Arch Coal Inc. trimmed its metallurgical coal production estimate by 21% this year.
Miners like Phillip Powell, 38 years old, of Wharton, have been swept up by the collapse. "A lot of guys that I worked with are scared of losing everything they own," said Mr. Powell, who was laid off in March from a section foreman job at a Patriot metallurgical coal mine. Mr. Powell said he sees no chance of finding another job that would come anywhere close to paying the $108,000 he earned last year. After 17 years in mining, he plans to go back to college to get certified to teach physical education.
Appalachian coal industry executives had been counting on metallurgical or " met" coal -- which is sold at a premium to steelmakers -- to offset the dwindling market for lower-grade thermal coal used by power plants. The thermal coal market has been weakening because utilities are buying cleaner-burning natural gas instead. Natural-gas prices have plummeted as energy companies used hydraulic fracturing to extract gas from vast shale formations.
In April, natural gas and coal each fueled 32% of the nation's electricity, achieving parity for the first time in the decades that the Energy Information Administration has tracked the data. Fo