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Coal is King: Demand worldwide has prices skyrocketingCoal is King: Demand worldwide has prices skyrocketing
By: Joshua Ball
Published: 05/09/2008

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WILLIAMSON, W.Va. – With coal prices spiking – and the demand for coal surging in overseas markets – local coal companies are experiencing tremendous growth.

And coal — taken from the mountains of eastern Kentucky and southern West Virginia — is fueling economies worldwide.

The National Mining Association says the value of coal exports grew by 19 percent last year to $4.1 billion. That margin is expected to grow this year.

Employment ads line newspapers across the region. Companies in eastern Kentucky have formed a partnership agreement with Big Sandy Community and Technical College to form the Kentucky Coal Academy, a collaborative effort for workforce development that trains soon-to-be miners and works with local companies to place students in particular jobs. Asimilar program – the West Virginia Coal Academy – exists at Southern West Virginia Community and Technical College’s Logan, W.Va. campus.

Big swings in the prices of coal and other commodities are common. But while the price of coal has slipped slightly in recent weeks, many analysts and companies are wondering whether high prices are here to stay.

As increasing numbers of the world’s poor join the middle classes, hooking up to electricity grids and buying up more manufactured goods, demand for coal grows.

World consumption of coal has grown 30 percent in the past six years, twice as much as any other energy source. About two-thirds of the fuel supplies electricity plants, and just under a third of the fuel supplies industrial users (mostly steel and concrete makers).

As the demand for coal — in the U.S. and across the globe — continues to rise, it could prove difficult to maintain the role as the world’s largest producer for coal.

Massey Energy, a Richmond, Va.-based company that operates mining operations in Pike and Mingo counties, announced last month a $310 million expansion that will result in a new mine opening every 17 days this year. This ambitious move could increase production by 25 percent by 2010.

The company’s net income increased 28.5 percent during the first quarter of 2006, earning $41.9 million – an increase of nearly 10 million over the first quarter of 2007.

Massey’s improvement was driven largely by revenue. The company increased produced revenue 4.5 percent to $543.2 million, and received higher cash margin per ton, which increased 8.5 percent.

A big part of meeting the demand for coal is employee retention.

Alpha Natural Resources, based in Abingdon, Va., recently announced a $13 million retention package at its 58 mining operations, including White Flame Energy in Varney. W.Va.

As the nation’s largest supplier and exporter of Metallurgical coal (a key ingredient in steel manufacturing) and with 89 percent of its reserves high BTU coal, the company hopes that the incentive package, which averages an increase of $3 per hour, will keep a competent and experienced workforce intact during the high demand for coal.

“Today, coal finds itself squarely in the middle of our nation’s discussion on energy independence,” Alpha Natural Resources President Kevin Crutchfield said. “It’s time we readied ourselves for an exciting future.”

According to the National Mining Association, a ton of coal that sold for $44.75 a year ago is now selling for $85.50. The rising price and demand globally has an experienced workforce, with the average age of 50, seeking to redefine itself.

As countries continue to develop, the demand for coal consumption – for energy and steel – will continue to rise.

Consol Energy, which operates a mining operation in Mingo County, announced earlier this month that coal exports had risen 30 percent (versus last year’s figures) for the first two months of the year.

Another local coal company, International Coal, expects to sell about 20 million tons of coal at an average selling price of $51 to $52.50 a ton, up from the previous estimate of $47 to $48 a ton this year.

Mike Whitt, the director of the Mingo County Redevelopment Authority, said in an interview earlier this year that coal provides a stimulus to the economies of the entire region. It is predicted that nine jobs are created for every coal-related job.

“We can all remember when coal was king,” he said. “While our organization continues to work with the mining industry to develop post-mine sites, we understand that the foundation of our economy is coal.”

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