Officials with the Richmond, Va.-based coal producer also told analysts they’ve been seeing promising signs that U.S. demand for coking coal to fire blast furnaces is recovering. Both are positive signs for U.S. coal producers and the ailing economy, which has left towering stockpiles of coal at power plants and in coal-producing states this summer.
“As China and India consume more coal, we believe our opportunity may be greater to sell our coal directly into these markets or to displace Australian and South African coal in the market as that production remains in Asia,” Massey Chief Executive Don Blankenship said.
Massey’s coking coal shipments to Asia are growing and should account for about half its exports over the final six months of the year, he said. “Used to be sometimes there wasn’t anything going to Asia.”
Coking coal imports to China have soared as the country’s steel mills have cranked up production this summer, said industry analyst Charles Bradford of Affiliated Research Group.
“They imported 4.6 million metric tons last month,” Bradford said. “For the first six months (of 2009) they only imported 12.7 million tons, so you did a third of the six months in one month.”
Activity also is picking up in the United States, where steel mills are operating at more than 52 percent of capacity, up from 47 percent in June, Bradford said.
“A lot of people are bringing facilities back online,” he said. “They’re all saying they’re see no economic recovery, yet they’re reopening capacity.”
Massey, too, has seen positive signs from U.S. steel producers. Coking coal accounted for 19 percent of the 9.4 million tons of coal Massey produced from mines in West Virginia, Kentucky and Virginia in the second quarter.
“We have seen at least two significant accounts change their shipment schedule positively, even at some fairly healthy prices,” Blankenship said. “So I don’t think we’re going to sell any more coal at high prices but I think people that have commitments to us appear to be more able to fulfill those commitments and so, therefore, you could see a better volume and second half met situation than we forecasted.
“On the utility side,” he said, “I expect it to be very ugly for the next 18 months.”
Still, Massey President Baxter Phillips said the company began rehiring a few laid-off workers during the second quarter, but still ended the period with 639 fewer miners.
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