The coal industry is slowly rebounding from last year’s recession with demand and prices inching upward, although inventories at U.S. power stations are still way higher than normal, U.S. coal mining executives said.

Demand from steelmakers for metallurgical, or coking coal was
rebounding quicker, especially in Asia, but it would probably take
another year for thermal, or steam coal used in power generation, to
return to the levels before last year’s economic downturn, said Kevin
Crutchfield, chief executive of Alpha Natural Resources.

“Met markets are moving and we see recovery for thermal in the not
too-distant future,” he told the Macquarie Group’s metals and mining
conference.

Talking of the past year in which demand and prices fell, Crutchfield
said “there were times when we all wished it would all be over. But now
we see things are turning and we are cautiously optimistic.”

But he noted electricity generation is down 4 percent so far this year and probably will end the year 10 percent down.

“We appear to be recovering from the recession…but inventories are
still too high. Some 100 million tons need to be taken out of the
market place to get back to a range of 130 million to 150 million tons.”

That is likely to occur “by the back end of 2010,” he said in comments to the conference monitored via a webcast.

New coal-fired power plants coming on line should account for another 13 million to 18 million more tons of coal demand.

On the global coal market, Crutchfield said it could be summed up in
one word — China. Asian consumption was expected to increase to 8
billion tons from 6 billion tons in the next 20 years, he said.

China was now a net importer of metallurgical coal for its steel
production which is expected to exceed 600 million tons this year –
roughly half the world’s total steel manufacture.

Alpha, he said, has capacity to produce 13.5 million tons of met coal
per year and planned to export about two-thirds of that production.

Victor Patrick, CEO of another U.S. coal producer, Walter Energy also noted the industry’s rebound.

“While we had a period through this year where our ability to sell was
constrained by the demand for our product, the customers weren’t there,
that is not the case anymore.

“We are back where we have historically been, where our ability to sell
our product is limited by our ability to get the product out of the
mine,” he told the Macquarie conference.

“In terms of the supply side, we’ve also seen this dramatic shift in
China’s influence in the market, from being a net exporter…to being a
net importer of coal.

“And of course, pricing outlook seems to be strengthening because of the supply and the demand factors,” Patrick said.

A ton of eastern U.S. coal that sold for $45.13 six months ago, was
selling for $48 on Monday, according to the industry newsletter, Coal
& Energy Price Report.

Source: Reuters

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