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2000-2012 Coal Age: 2000- Present Safety Becomes a Priority 2000-2012 T he U.S. coal industry is remarkable. Having demonstrated the resilience required to survive the turbulent 1990s, it continues to adapt and reposition itself to meet the challenges it will face in the next 10 to 20 years. For most coal operators, sur- vival has meant chasing the market with more tons at lower prices. The only way they can free themselves from survival mode is by balancing supply with demand, adopting some form of price discipline, improving productivity, and controlling costs. Advancements in technology offer the best solution. In a lot of ways, the U.S. coal industry has come full circle in the new millennia. Despite dramatic improvements in safety, several tragic mine disasters during the decade have tarnished the industry's image and led to costly oversight and regulation. In some cases, those regulations have improved safety and operating conditions. Similarly, several mishaps have allowed large discharges into the inland waterways. These events allow the public to form negative images of the modern coal industry that are not representative of the collective group. The message that goes untold is how 98% of the coal compa- nies are doing the right thing. Daily they live up to higher safety and environmental standards while providing the U.S. with a low-cost form of electrical power. In the early part of the decade, short-term contracts prevent mines from investing in capital projects, which eventually impacts production. Costly compliance measures and low prices force more coal operators out of the marketplace. Mountaintop mining falls under increasing scrutiny putting 50 million tons of central Appalachian coal in jeopardy. By 2007-2008, the tables turn and U.S. coal producers are almost giddy. They have never experienced such profits espe- cially for metallurgical coals. Australia's mines in Queensland were flooded. The South Africans were rationing power. Asian demand for coal was peaking. The suddenness of the 2008 bust maybe remembered most because it happened when met coal was selling for more than $300/ton. Prices have never climbed and contracted that quickly. Even though 2010 was a difficult year for the coal business, coal companies were looking forward to 2011 and 2012 more optimistically. The U.S. had regulated itself out of business in several regions and prices were beginning to improve. As the next decade begins though, energy markets find themselves awash is inexpensive natural gas. Domestic Market Remains Cyclic In 2000, demand for coal slows and the railroads and river docks get a chance to catch up. The tech bubble has burst and the U.S. economy is slowing. Both the summer of 1999 and 1999-2000 winter were mild. Coal prices are at a modern-day, all-time low. Natural gas prices recover first to $6 per million Btu. High gas prices were prevent fuel switching (coal is roughly equiva- lent to $2 per million Btu). Coal inventories begin to decline as coal operators struggle to keep pace with demand. Those with uncommitted coal are taking advantage of high spot prices. Spot prices for Powder River Basin (PRB) coal moves above dou- ble digits to $12/ton for the first time in April 2001. California is hit by a series of rolling blackouts and energy is the lead story on the evening news. Electric utilities begin building capacity for future demand. More than 65,000 mw of new coal-fired capacity is announced. It's estimated that more capacity was added during those few years than all of the 1990s. Almost all of that capacity, however, came in the form of gas-fired power. At the time, the coal indus- try warns the utilities not to place all of their eggs in one basket, but those stranded investments will pay dividends in the next decade. From the Coal Age2011 Annual Forecast. *Coal Age, January 2011 172 www.coalage.com From the Coal Age2011 Annual Forecast. *Coal Age, January 2011 100th Anniversary Special Issue August 2012