Coal Age

JAN-FEB 2018

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18 www.coalage.com January/February 2018 forecast 2018 The Coal Industry Prepares to Extend the 2017 Recovery Plans for capital spending increases on the heels of growing production by steve fiscor, editor As to whether stability has been restored to the coal industry, the 2017 numbers speak for themselves. Last year, total coal production increased by 58.5 million tons to 786.9 million tons from 728.4 million tons in 2016, according to preliminary figures from the Energy Information Ad- ministration (EIA). However, the devil is, as they say, in the details. Some coal-pro- ducing regions saw healthy increases, while others did not, and exports played a persuasive role. After two years of steep production de- clines, the coal business posted a positive number. The big question is: Will it be able to grow from this level or at least maintain it? For those working outside or against the coal industry who do not share the same level of unbridled optimism, the jury is still out. In its most recent short-term outlook, the EIA has forecast reduced U.S. coal pro- duction in 2018, falling by 2%. For 2018 and 2019, the agency expects coal production to hover around 760 million tons. Coal op- erators in general are betting against them. For production to significantly in- crease in 2018 and beyond, however, a few market fundamentals need to work in favor of the coal industry. Growing the economy and restoring or building new factories will increase demand for electricity. An increase in natural gas prices would be helpful from a compet- itive fuel standpoint. Healthy demand from abroad would support exports and a weak dollar economy would sustain that scenario. By year-end, the outcome of the midterm elections could become a pivotal factor for the coal industry's na- scent recovery. At the beginning of each year, Coal Age publishes its Annual Forecast based on a survey of its readership. The informal study gives an assessment of the current market situation, as well as the state of mind among coal operators. In addition to supply and demand fundamentals, the survey also asked coal operators about their feelings, the amount of money they plan to spend this year, and how they in- tend to spend it. Based on that informa- tion and anecdotal information from the leading coal companies and the EIA, Coal Age attempts to identify trends. Looking back to the beginning of 2017, a shell-shocked U.S. coal indus- try saw 2016 production levels drop to their lowest level since 1978, but they knew the "war on coal" was about to end because they had a friend in the White House. Throughout the summer, coal operators found much-needed stability and, during the fall, the Coal Age Fore- cast Survey defined a group of profes- sionals that were more positive for the most part with a more pragmatic out- look toward 2018. They said money has been allocated to make long-overdue in- vestments to expand production. Survey Says Coal Age contacted 500 professionals who mine and process coal, and received 44 completed surveys. The majority of them (72%) produced bituminous coal. Sub- Figure 1 — Production, Consumption and Attitude

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