| “We continue to see many positive
signs that point to a sustained rebound in U.S. coal markets,”
said Arch Coal President and CEO, Steve Lear. “During
the first half of 2003, coal consumption at U.S. power
plants increased 3.7%, as utilities sought to maximize
output from coal-fired units in the face of sharply higher
natural gas prices and reduced nuclear availability”.
As a result of this increased consumption, Arch projects
that coal stockpiles at U.S. power plants declined to
approximately 120 million tons at the end of September,
nearly 15% lower than at the same time last year.
While the long-term outlook for increase U.S. coal
production is positive, output from eastern coalfields
has declined, as producers struggle with declining and
degrading reserves, high cost and operational difficulties.
Until last year, some would argue that the U.S. coal
industry had excess capacity. Now it seems that if one
major mine goes offline, it has a direct to impact on
spot coal sales.
Production capacity is an industry concern and how
a coal company deals with it will probably determine
its future financial performance. If coal prices continue
to rise and the mine has no additional capacity, they
can’t take advantage of spot market sales.
Today’s coal prices compare favorably
to what coal operators were receiving only a couple
of years ago. Coal Age believes that this sustained
level of coal prices will allow mines to schedule much
needed improvement and projects which will pay future
dividends in the form of increased production capacity.
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