Consol Energy lands rare coal-shipping deal with China

Joe Napsha
| Wednesday, Aug. 19, 2009

Consol Energy Inc. is shipping 88,000 tons of metallurgical coal from a Virginia mine to Chinese steelmakers, the first time the coal-producing giant has shipped that kind of coal to China, the company said.

"It's usually different for East Coast producers to ship coal to China," said Thomas Hoffman, spokesman for Cecil-based Consol Energy. It's more common for China's imported coal to come from Australia, he said.

Consol loaded one cargo ship of metallurgical coal to China and would be interested in providing more, Hoffman said. A Japanese trading company arranged the deal with a group of Chinese steel companies, who will use it to produce coke, an ingredient in steel production. Terms of the sale were not disclosed.

Consol's sale of coal from its Buchanan mine near Mavisdale, Va., is a bright spot on what has been an otherwise down year for U.S. coal exports. The Buchanan mine produces coal desired by coke oven operators for its low ash and low sulfur content, Hoffman said.

Exports of metallurgical coal in the first quarter of this year fell by 6.7 percent to 8.46 million tons, from 9.07 million tons in the same quarter of 2008, according to the Energy Information Administration. Coal exports overall fell in the first quarter to 13.3 million tons, a reduction from 15.8 million tons for the same period a year ago.

In 2008, metallurgical coal exports rose by 32 percent to 42.5 million tons, from 32.1 million tons in 2007. Most of the exports — 25.5 million tons — went to Europe. Prices jumped 51 percent to $134 per ton, an increase of about $43 a ton over the 2007 prices, the government said. Effects of the global recession did not take full effect until late in the year.

This year has not been so kind. Steel mills around the world have been running at less than 50 percent capacity, and blast furnaces have been idled.

"The steel market plummeted as fast as it rose ... because of the downturn in the global economy," said George Ellis, president of the Pennsylvania Coal Association, a trade group based in Harrisburg.

There should be a pick-up in demand for metallurgical coal because steelmakers are restarting blast furnaces, said analyst Charles Bradford of Affiliated Research Group LLC, New York.

"Everyone's opening up blast furnaces right now. You can't have one (steelmaking) without the other (metallurgical coal)," Bradford said. The steel industry believes the operating rate will be closer to 60 percent to 70 percent than the current rate of around 50 percent, he said.

In addition to selling the coal to China, Consol earlier this month received a permit from the Army Corps of Engineers to conduct mountaintop surface coal mining at Peg Fork in Mingo County, W.Va., which is along the Kentucky border.

That operation, relatively small compared with other mines, may begin next month after preparation work is complete, Hoffman said.

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