US coal production must drop more - Mr Brett HarveWednesday, 05 Aug 2009
AP cited Mr Brett Harvey CEO of mine operator Consol Energy as saying that
rival producers are contributing to a glut of coal on the market by building stockpiles despite dropping demand for electricity.
He said that
“Power plants have enough coal on hand to operate for about 45 days up from about 25 days a year ago but some have up to 80 days worth of supply. What’s more worrisome are growing inventories of coal that’s sitting unsold at mines.”
Mr Harvey said that “When I drive by them, it makes me nervous. If you see inventory build at the utilities and inventory build at the coal mines that just extends the life of the coal that has to be burned through. That coal is going to move to the utilities before you see any price movement."
He said that “I’m concerned about restraint that has been announced in coal markets. It’s not showing up at the mining operations of some of our competitors.
They’re building stockpiles against growing stockpiles at the utilities."
Consol benefited from price gains in the Q2 when it reduced production by 2.2 million tonnes to 14.4 million but managed a 12% profit increase as per tonne prices and margins increased.
Consol plans to cut 2009 production even further, saying recently it now expects to mine 58 million tonnes of coal. The company had dropped that number to 62 million tonnes after the Q1.
Most other major US producers including Peabody Energy and Arch Coal have trimmed production plans already this year but Mr Harvey questioned whether operators are following through.
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