UPDATE 1-Consol expects higher coal prices on world demand
Thu Jul 26, 2007 6:41PM EDT
reuters.com
(Adds comments from Massey Energy Co.)
NEW YORK, July 26 (Reuters) - Coal miner Consol Energy Inc. (CNX.N: Quote, Profile, Research) said on Thursday U.S. coal prices should rise as miners in the Eastern United States reduce output and on higher international prices for metallurgical coal.
Eastern U.S. low sulfur coal prices are up about $3 a ton from the beginning of the year to about $41.50, but are well below levels in 2005 when rail outages spiked coal prices across the country.
U.S. coal supplies are up about 25 percent from last year, which has helped cap prices, as have swollen U.S. supplies of natural gas, which is also used to generate electricity.
Even so, Consol said the U.S. coal used for power should rise more this year on reduced production in Central Appalachia from smaller, less productive coal operators that are experiencing higher safety costs for underground mines.
Higher international prices for metallurgical coal should also wind down supplies, Consol said in a release on Thursday that listed its earnings for the second quarter.
"Consol believes there could be as much as 10 million tons of low quality met coal that will shift from the electricity generation market to the metallurgical market because of strong pricing for metallurgical coal in the international marketplace," the company said.
Coal producer Massey Energy Co. (MEE.N: Quote, Profile, Research) on Thursday agreed that metallurgical coal is strong. "An 8 percent increase in world steel production in the first six months of the year and bottlenecks in Australian coal supply have lent support to the export market for U.S. metallurgical coal," the company said in a statement late on Thursday.
Massey warned that as utilities put scrubbers on their power stations to reduce pollutants, like those that cause acid rain and smog, demand for low sulfur eastern coal could fall.
The company said studies suggest that Central Appalachian utility coal sales could fall as much as 45 million tons by 2010 from last year's 168 million ton level.
But Consol said international sales could keep demand high for eastern coal.
"Since the beginning of the year, Consol Energy has substantially increased the amount of steam coal it expects to export to Europe. The company now expects to export at least 4 million tons of high-Btu steam coal for 2007 -- double the volume the company exported in 2006 -- primarily through its terminal at the Port of Baltimore to international customers," Consol said.
Consol said higher coal prices and the sale of some Appalachian assets helped boost second-quarter earnings, which rose to $153 million, or 83 cents per share, from $111 million, or 59 cents per share, a year earlier.
Massey said second-quarter profits rose on higher coal revenues from increased prices on new supply contracts. It said second-quarter net income jumped to $34.9 million, or 43 cents per share, from $3.2 million, or 4 cents per share, a year ago. |
