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f o r e c a st 2 0 1 3 U.S. Coal Miners Will Dig Deep to Compete With demand from power plants remaining flat, coal operators cling to exports while dealing with federal regulators BY STEVE FISCOR, EDITOR-IN-CHIEF Looking at the U.S. coal markets for 2013, the question is not whether it's going to be bad or good, but how bad will it get, before it gets better. Coal operators are facing the toughest situation they have faced in a generation. For more than three years they have dealt with constant overreach from federal regulators before a glut of natural gas swamped energy markets last summer. The re-election of President Obama last fall stole what little wind remained in their sails. Four years after the global financial crisis, the U.S. economy has not improved substantially and neither has the demand for electricity. During the election, coal operators openly expressed their frustration and disbelief with the Obama administration and the Environmental Protection Agency (EPA). Outside the U.S., demand for steam coal remains healthy, but prices for metallurgical grade coal have dropped substantially. Every January, Coal Age publishes its Annual Forecast, based on a survey conducted during late November. The informal study gives an assessment of the current market situation, as well as the state of mind among coal operators. Based on that information, and information Figure 1—Production, Consumption & Attitude from the leading coal companies, the Energy Information Administration (EIA) and the Edison Electric Institute, Coal Age tries to make an informed decision about future market trends. Last year's Annual Forecast predicted a decrease by 1.2% for 2012 or 13 million tons from 1,089 million tons to 1,076 million tons. As can be seen from the Top 10 Coal-Producing States chart (See News, p. 5), total U.S. coal production fell by 6.9% in 2012, or 73 million tons, to 1,016 million tons. While this is not great news, observers should not lose sight of the fact that the U.S. still mined more than 1 billion tons of coal last year. Overall electricity demand was flat and coal consumption declined in 2012. As a baseload fuel, coal consumption Figure 2—Capital Expenditures How will the mine spend the money? What is the capital expenditure budget for 2013? Less than $10 million 44% $10-$25 million 24% $25-$50 million 9% $50-$100 million 8% More than $100 million 15% For 2012, did capital expenditures: Increase No change Decrease 22 www.coalage.com 17% 27% 56% January 2013