AP NEWS

WV coal industry’s future lies in met coal

February 19, 2019
The announced opening of a new coal mine in Barbour County is good news for West Virginia's coal industry even as the market for thermal coal continues to decline.

For years, Arch Coal has sat on reserves of high-quality metallurgical coal in Barbour County while it developed its Leer mining complex to the north in Taylor County.

Now the time has come to develop those reserves while the world demand for met coal is growing.

On Feb. 14, Arch Coal announced it will invest $360 million to $390 million to develop its new Leer South mining complex in Barbour County. The new operation could begin production in late 2021 with about 600 miners. With current market conditions, Arch expects to recover its capital investment in about 18 months once it reaches full production.

Coal from Leer South is the type used to make coke, which is used in making steel.

The company plans to sell 3 million tons of Leer South coal per year into the international markets by way of ports on the East Coast. In a conference call last week, Arch executives said the world market for coking coal will need about 76 million tons of new capacity by 2025.

About 82 percent of the coal mined at Leer South would be targeted at markets in Europe and Asia. India alone expects to need about 30 million tons per year of coking coal by 2025 based on the growth of its steel industry, Arch executives said. That country’s coking coal is of poor quality, so Indian steelmakers look to foreign sources. Arch wants to be in that market.

Leer South should match Leer’s ability to produce high-quality coking coal in the low $50s per ton, compared with the U.S. average of about $70, Arch officials said. Leer South could generate profits of about $90 per ton.

Like Leer, Leer South will use the longwall method of mining coal. Arch will move longwall equipment from its Mountain Laurel mine in Logan County to Leer South early next year. Mountain Laurel will then use the room-and-pillar mining method. Output there will decrease by about 20 percent per year.

“Arch expects Mountain Laurel’s perton costs to decline modestly and its product quality to improve following the transition. The transition will not result in the layoff of any of Mountain Laurel’s outstanding workforce, as they will be repositioned in the new room-and-pillar mine plan,” Arch said in its announcement.

It has long been obvious that the coal industry is in decline as the market for coal used in power plants drops. Cheap natural gas, the rise of renewable energy sources and regulatory requirements for expensive pollution control equipment at coal-fired power plants is driving the market for thermal coal down.

The same day Arch announced it will add met coal mining capacity, the Tennessee Valley Authority said it will retire two coal-burning power plants in the next few years. One is in Tennessee and one is in Muhlenberg County, Kentucky. President Donald Trump had asked TVA to keep the plant open, and Senate Majority Leader Mitch McConnell, R-Ky., said he was disappointed in the TVA’s decision.

Yet the demand for met coal is increasing as more steel is produced worldwide. Southern West Virginia has benefited from this new demand. The Leer mine, which opened in late 2011, has been Arch’s flagship mine for met coal production.

Every industry faces changing realities. Here in West Virginia, the future of mines that sell coal into the power market will remain dim unless new technologies, new market demands or new regulations make coal competitive again. The market for met coal appears brighter, and it looks like West Virginia’s mines aimed at that market have a stable future, at least for the short term.