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World Demand Driving Mining Resurgence
Monday, September 15, 2008 4:53 PM


(Source: The Knoxville News-Sentinel)trackingBy Bill Brewer, The Knoxville News Sentinel, Tenn.

Sep. 15--The king isn't dead after all.

Instead, King Coal has made a remarkable recovery in East Tennessee since industry prices hit rock bottom in 2000 at $25 a ton, making mining too expensive for all but the operators with the deepest wells and pockets.

Less-than-scientific economic indicators of an industry on the rebound are all around: fully loaded coal hoppers are leaving the area via Norfolk Southern and CSX in greater numbers; more coal-hauling big rigs are running the roads in mining counties; more job postings are appearing seeking miners; and stock prices of major coal companies are 1,000 percent higher than eight years ago.

Not-so-anecdotal evidence also is apparent. The U.S. Office of Surface Mining reports that in 2000 there were applications for mining permits. In 2007, that number was up to.

The resurgence also is being felt in Southeast Kentucky, Southwest Virginia, West Virginia and North Alabama, states with especially heavy mining activity.

So, what's stoking this renewed interest in America's most abundant fuel source?

Despite being strictly regulated and a favorite target of environmental protests, coal is in favor again because of world demand. The United States' attempt to stem oil consumption by relying on alternative fuel sources is overshadowed by China's and India's growing appetite for the plentiful commodity.

The U.S. Energy Information Administration reports that China and India are a leading cause for rising coal consumption and will continue that role for years as they emerge into developed countries. China also has shifted from being a major exporter of coal into a major importer as its demand outpaces its supply.

In the United States, demand eclipsed supply in 2007 as electricity generation and exports rose as production dipped. That trend is to continue this year as supply remains tight.

In a May presentation at the Merrill Lynch Global Metals & Mining Conference, Knoxville-headquartered National Coal Corp. reported that U.S. demand is exceeding supply because of: Mine closures and increased regulatory oversight; Increased electricity generation; A weak U.S. dollar that is contributing to rising exports and a leveling off of imports; Strong international demand for coal; Inventory drawdown that has run its course; Consolidation in the mining industry as reinvestment wanes. In 1980, the top 10 coal producers represented 33 percent of total coal production. In 2006, the top 10 accounted for 68 percent.

Another reason? More electricity needed to power more energy-guzzling personal computers, personal communication devices and big-screen, high-definition televisions spreading throughout American households.

Tim Patterson, secretary/treasurer of Smoky Mountain Coal Corp., a West Knoxville firm that brokers services like financing, transportation and logistics for coal mine operators, remembers starting in the coal business in 1978 when the mineral was selling for about $30 a ton.

Coal prices had reached a peak and the industry was buzzing with activity. Times were good for Central Appalachia's coal fields until a 19-year downward cycle began in 1981.

"Except for a few years when there was a threat of a labor strike, the market was pretty flat," Patterson said, noting that during those lean years mining companies had to invest in new technology to stay competitive.

"There has been a lot of consolidation," he said.

Coal mining's ups and downs are legendary, reliable trends that Daniel Roling has been able to set his calendar by.

The president and CEO of National Coal has been marking the cycles in 17-year increments, an interesting time frame given his estimate that it can take up to 17 years to develop a mine from property lease through permitting to daily production. Permits have taken as long as seven years to get, he noted.

But Roling has noticed a change in the cycle -- they're getting longer.

"The present cycle is an upward cycle that could last 25 years. The last up cycle -- 1974 to 1984 -- built the last generation of coal mines in the U.S.," he said.




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