Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, January 26, 1992 TAG: 9201280318
SECTION: ECONOMY PAGE: 16 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
DATELINE: LENGTH: Long
SLOW ECONOMY MEANS ROCKY YEAR FOR COAL INDUSTRY
Last year was rocky for the coal industry in Virginia and nationwide.The outlook isn't much better.
The U.S. coal industry faces another flat year in 1992, said Connie Holmes, senior vice president for policy analysis with the National Coal Association in Washington, D.C. "We don't really anticipate a lot of change from 1991," Holmes said.
In the near term, the gradual recovery of coal markets will continue, said Rafael Villagran, a stock analyst with Shearson Lehman Brothers in New York.
In the fall, spot prices of coal were showing improvement from the bottoms that were hit in the spring, he said. The Department of Energy, however, reported the price of coal delivered to utilities actually dropping from March to September by 2.4 percent, from $31.03 per ton to $30.30.
In the longer term, well-positioned companies, including many in Central Appalachia mining cleaner-burning low-sulfur coal are on the verge of vigorous growth, Villagran said.
The industry actually encountered a production decline last year after breaking the billion-ton barrier for the first time in 1990. Production was estimated last year at 998 million tons, down from 1.29 billion tons in 1990.
The electric utilities are the biggest users of U.S. coal. And demand for electricity was relatively flat last year because of the recession, Holmes said. How coal fares overall this year will depend on how well the U.S. economy performs.
Island Creek Coal Co., one of Virginia's three largest coal companies - along with Pittston and Westmoreland, saw its overall production drop in 1991 from 19.1 million to 17.5 million tons. Island Creek, based in Lexington, Ky., has 1,350 employees in Virginia.
Island Creek Chairman S.O. "Bud" Ogden reported that income from the company's mining operations was not sufficient to meet its needs last year and Island Creek's parent, Occidental Petroleum, had to provide the company roughly $50 million to cover operating expenses.
The company closed several mines in 1990 and late in the year made the decision to close one of its large Buchanan County mines, which employed 300 miners.
Such decisions, however, helped reduce excess coal inventories throughout the industry last year meaning higher prices are expected. In the export market, the demand for steam coal continues to improve.
Island Creek hopes for improved profits, because of improved productivity and the streamlining of its operations. But if the U.S. economy continues to suffer, more low prices can be expected for the coal industry, Ogden and other coal executives said.
While coal prices may be held down, Westmoreland Coal Co.'s tonnage seems to be holding steady and may even increase, said company spokesman Stephen Anderson.
Westmoreland, which is based in Philadelphia and employs 950 Virginians, saw its tonnage increase slightly last year, with some of the gain coming from the export market.
Over the previous three years, the company had been continuously improving its financial picture until it ran into some bad luck in 1991, including some difficult mining conditions at its Holton Mine in Wise County.
Pittston, too, ran into some geological problems during 1991. But the Greenwich, Conn.-based company is looking forward to a promising future, said Garold Spindler, president of the Pittston Coal Group Inc. of Lebanon.
The agreement that Pittston signed with the United Mine Workers in 1990 has helped the company lower its production costs and increase its employment opportunities, Spindler said.
Joseph Farrell, Pittston's new chairman, has told Wall Street analysts he is very pleased with his company's current working relationship with the UMW. The company is currently looking to expand its U.S. coal holdings and several new mines are in the planning stage, Farrell said.
The United Mine Workers union is not quite as enthusiastic about the agreement with Pittston as the company.
The UMW has seen an increase in grievances because of differences with the company over the language of the contract. Also problems have come up over health care and contract provisions that were supposed to create more union jobs, said Donnie Lowe, president of Virginia's UMW District 28.
An agreement between Virginia's two major railroads, Norfolk Southern and CSX, to provide coal to Virginia Power's plants in Virginia on a joint-access basis (thereby lowering transportation costs) has already begun to show potential for increased use of Virginia coal by the utility. Most Virginia coal mines are located on NS lines but most Virginia Power plants are on the CSX.
Westmoreland, whose Virginia operations are based in Big Stone Gap, recently entered into a three-year contract to supply a Virginia Power plant in Chesterfield County, John Randolph of the Virginia Tech Center for Coal and Energy Research reported.
Through November, the U.S. Department of Energy reported 1991 coal production in Virginia at 41.2 million tons or 5.4 percent less than the 43.5 million tons mined through November of 1990. Nationally, coal production through November was running 925 million tons or 3 percent behind the 953.4 million tons mined through November in 1990.
Virginia's coal production is limited to seven counties in the far Southwestern portion of the state. However, Buchanan County, which produced 19 million tons in 1989, is the fifth-largest coal producing county in the nation and third largest in the eastern United States.
In 1990, according to the U.S. Energy Department, Virginia produced 46.9 million tons of coal with 10,342 miners in 340 mines and ranked seventh among the states in coal production. That compares with 35.02 million tons mined in 1970 from 803 mines by 10,630 miners and a sixth-place ranking.
The average price of a ton of Virginia coal has reflected the productivity gains. In 1975 it sold for $30.46. Similar coal sold in 1990 for $28.05 or $2.41 less.
In 1990, the average U.S. coal miner made $38,300 a year for his labor. The miner's average age was 39 and average time on the job was 11 years, 8 at the same company. That year 143,500 miners were employed, including 48,000 members of the United Mine Workers of America.