Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, October 12, 1994 TAG: 9410120105
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: From staff and wire reports
DATELINE: LEXINGTON, KY. LENGTH: Medium
Also, if national coal production continues at its current pace through the end of the year, it could break the billion-ton mark for the first time since 1990.
``The market has finally come into balance after about a decade of being out of balance - too much supply vs. demand,'' said Daniel Roling, a coal industry analyst for Merrill Lynch.
Nevertheless, Roling said he predicts large coal companies will get larger, the number of companies will grow fewer and coal jobs will continue to dwindle. But he considers that a positive sign for the industry.
``For the first time in the last 10 years, we investors might actually look at putting our money into coal,'' Roling said.
At a conference on Appalachian coal Tuesday in Abingdon, Roling said the U.S. export market for coal is also looking better. Europe is coming out of a recession which had kept it from buying more U.S. coal, he said, and China is expected to increase its coal use every year for the next 10 years by an amount equal to the entire coal consumption of Switzerland.
``The U.S. coal industry is finally going global,'' he said.
Norfolk Southern Corp. anticipates increasing coal sales to other countries, including Europe and the former Eastern Bloc nations, the railroad company's vice president for coal marketing, William Bales, told the conference.. He said NS spent $400 million in recent years building or fixing coal cars and also has been buying new locomotives in anticipation of the increase.
``We believe exports are going to improve, and consequently we have been preparing ourselves,'' he said. ``U.S. coal can be very competitive if we increase production and watch our pricing.''
Factors have come together to give prices a needed boost from a low point of about $20 a ton in April 1993, including the United Mine Workers' nine-month strike last year, flooding on the Mississippi River, a cold winter followed by a warm summer and depletion of utilities' stockpiles.
Prices have crept back to just under $30 a ton, still a far cry from the boom years of the early 1970s when prices on the spot marked soared as high as $100 a ton.
``Boom is a strong term,'' said Ron McMahan, a coal industry analyst for Resource Data International. ``It's not like you're going to find all those guys in Appalachia driving around in Cadillacs again. It's just that the growth that was anticipated is being realized.''
Also, Appalachia, especially the high-sulfur coalfields, isn't sharing much in the rebound as strict new federal clean air standards go into effect Jan. 1.
Low-sulfur coalfields in the West have benefited most. According to the industry publication Coal Outlook, production was up 15 percent in Wyoming over last year during the first six months of this year and up 20 percent in Montana.
During the past three years, more than 25 percent of U.S. coal production has changed hands, McMahan noted.
Staff writer Paul Dellinger contributed to this story.
WHY COAL IS ON A REBOUND
Labor
Millions of tons of coal were taken out of the marketplace as a result of the nine-month United Mine Workers strike last year. Some mines closed permanently.
Transportation
Mississippi River flooding during the UMW strike damaged train tracks and caused other serious transportation problems. With the current market, some coal companies also are having trouble finding enough rail cars to meet demand.
Utilities
Partly because of the labor and transportation problems, many utilities let their coal stockpiles decline substantially betting that prices would decline after the end of the strike. But that didn't happen. And with a cold winter followed by a hot summer in many parts of the country, the Energy Information Administration expects electrical demand to increase 3.3 percent in 1994.
Clean Air
Strict new limits on sulfur-dioxide emissions under 1990 amendments to the Clean Air Act have forced some utilities to scramble to obtain low sulfur coal. Prices on the ``spot'' or non-contract market have climbed as high as $29 a ton.
- AP
by CNB