Hill & Associates study says Pittsburgh seam poised to produce 92 million tons of coal in 2002

ANNAPOLIS, Md., Nov. 28, 2001 – Production at Pittsburgh #8 coal seam is poised to rebound to 92 million tons in 2002, and if demand is present, could reach 141 million tons by 2011, according to a new supply trends report.

The findings were part of Hill & Associates’ update of Pittsburgh Seam Supply, Demand and Price Trends 2001-2011, a detailed summary available on the developed and undeveloped reserves of this coal seam.

After production reached 85 million tons in 1998, several mine closings caused Pittsburgh #8 seam yield to drop to less than 79 million tons/year in 1999 and 2000.

Production in 2001 was scheduled to rebound to more than 87 million tons, but problems at several mines will limit it to about 81 million tons.

The production increase in 2002 will require that CONSOL Energy’s Mine 84 and Robert Murray’s Maple Creek mine “get back on their feet,” that the Loveridge mine re-opens late in 2002 and that expansions at CONSOL’s McElroy and Robinson Run mines and Murray’s Century mine are successful, Hill & Associates noted.

The Hill & Associates report has been improved to encompass new comprehensive mine profiles, location maps and detailed analyses of the seam’s future supply, the company said. Mine and property specific data on coal reserves, quality and production costs are presented as well. Supply curves are based on up-to-date information on the production capability of each active and planned mine in the region. Projections of future potential capacity on a mine-by-mine basis as well as demand and prices for the period 2001-2011 are provided.

Production of near-compliance coal (containing less than 2.5 lbs. SO2/MMBtu) is expected to decrease over the next 10 years as the Maple Creek, High Quality and Mathies mines close and as Bailey, Enlow Fork and Mine 84 move into mid-sulfur coal reserves, Hill & Associates said.

Coal shortages that caused acute price spikes are relieved somewhat, and availability will be better in 2002 unless Mine 84, an operation that “should be closely watched,” is unable to overcome its difficulties.

Of course, the Pittsburgh seam is a United Mine Workers of America stronghold, with some 70 percent of mine production represented, and a strike in December 2002 could create more pricing havoc, Hill & Associates said. Peabody and Murray, particularly, could be wearing UMWA bullseyes.

Absent a strike, Pittsburgh seam coal probably will be in over-supply by 2003.

Longer-term, the region will be helped by the depletion of the SO2 credit bank and tighter SO2 emission rules, which will be kind to higher-sulfur coals due to the additional scrubbing that will likely occur at U.S. power plants.

One or more new mines are likely to open in the region, and production restraint could create a scenario in which 2004-2008 pricing spikes to “above $25/ton,” Hill & Associates said.

The Pittsburgh Seam Supply, Demand and Price Trends 2001-2011 is priced at $6,000. For more information, you may contact John Hanou of Hill & Associates at 410-263-6616.

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