FEATURE-U.S. miners prosper as world demand for coal booms
23 May 2008 16:13:15 GMT Source: Reuters
By Bruce Nichols BROOKWOOD, Ala., May 23 (Reuters) - Two thousand feet under the west Alabama woods, dust flies as a machine chews into the Blue Creek coal seam, mining black gold for a booming world market that is lifting the once-laggard U.S. coal industry. Economic growth in Asia has outrun world coal supply, pushing buyers to the United States -- a market traditionally viewed as too expensive -- for backup. Bad weather and producer problems around the world have fed the frenzy. The new prosperity shows at Jim Walter Resources Mine No. 4. Walter has paid bonuses, bought new equipment and hired more workers. It is expanding a nearby mine. Parent company Walter Industries Inc <WLT.N>, which posted record first-quarter earnings, is shedding its home-building roots to focus on coal. "The company's a little bit freer with money," said John Storm, a supervisor who arrives at the working face of the seam by descending 2,000 feet in an elevator and then riding a tram through 5 miles of deep tunnels. George Richmond, chief executive of Jim Walter Resources, said improved profitability "does allow us to share some of the rewards." Walter produces mostly metallurgical (or "met") coal for steel-making and is neither the biggest nor smallest coal company. But it is representative of the industry turnaround. The Tampa, Florida, company recently sold met coal for $315 a tonne, triple the price of a year ago. Prices for the other major coal type, thermal coal used to make steam at power plants, also have nearly tripled to $110 a short ton ($121 a tonne). Coal's upturn, which began in 2004 for the met side and 2007 for the steam side, has ended two decades of decline, said Pearce Hammond, who heads coal and alternative energy analysis at the investment bank, Simmons & Co. Since the beginning of the year, the Dow Jones coal index <.DJUSCL> is up 39 percent. Shares of Walter Industries, meanwhile, have skyrocketed more than 140 percent. "Companies are announcing expansions, opening new mines, and we're not seeing many close," said Phil Smith, spokesman for the United Mine Workers of America, which represents about a quarter of U.S. coal miners. The count of U.S. coal mines fell to a historic low of 1,312 in 2003 but has now crept back to about 1,450, according to the National Mining Association. The number of miners employed is up 12,000 since 2003, when there were about 71,000, to more than 83,000 as of last year, according to NMA data. SCRAMBLING After years of cutbacks, mining companies are scrambling to rebuild the work force. "For years, there was never anybody added to the work force. Now, everybody's 50-something," said Keith Shalvey, manager of Mine No. 4. Some companies are offering incentives to keep veterans and hire rookies for a job that is already high-paying. The work remains dangerous, although it is much safer than in the past. Thirty-three people died in coal mines last year, U.S. Mine Safety and Health Administration data show. Union scale for a trainee is $21.27 an hour plus benefits, UMWA's Smith said. With overtime, some miners earn $90,000 or more a year. The explosive growth of world demand and the increase in prices have had an effect on U.S. production. Year-to-date U.S. coal output rose to 447.7 million tons through May 17, compared with 433.3 million tons through May 17 last year, a 3.4 percent increase, according to the U.S. Energy Information Administration. Analysts have said, however, that it is doubtful U.S. output increases alone can close the world supply-demand gap. Key Central Appalachian production is in long-term decline, and government permitting of mines has slowed amid tighter regulation. At Jim Walter No. 4, John Storm and his crew are doing their part. Their long-wall machine cuts 850 feet one way, then 850 feet back, as if it were shearing a big black sheep. It takes bites 3 feet deep and 7 feet high, each pass requiring about 50 minutes. Slabs of coal and rock fall on a conveyor belt, which takes the stuff to a lift, which hauls it to the surface for sorting, washing and shipment by truck, rail or barge. At peak performance, the No. 4 long-wall operation produces about 1,000 tons of coal per hour. After years of placing cost-cutting right below safety on the priority list, management now has a happier focus, said Fred Kozel, Walter's vice president for operations. "You're more focused on tonnage than cost," Kozel said. (Reporting by Bruce Nichols, editing by Matthew Lewis)
