Coal Age

JAN 2014

Coal Age Magazine - For nearly 100 years, Coal Age has been the magazine that readers can trust for guidance and insight on this important industry.

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f o r e c a st 2 0 1 4 Coal Markets Will Rebound in 2014 Supply and demand fundamentals work for the industry after huge rationalization in 2013 BY STEVE FISCOR, EDITOR-IN-CHIEF The best picture for U.S. coal markets for 2014 would be sustaining the momentum the industry experienced during the second half of 2013. Last year turned out better than expected. Total production numbers are down, but they are not down as far as they could have been. Utility consumption of coal grew at a healthy clip starting in the second half of 2013. Spot prices for some coals have also increased. With natural gas prices sitting at a healthy level, the stage has been set for a modest rebound in 2014. Even though equities on the New York Stock Exchange have reached historic highs, the U.S. economy — as far as job creation for the manufacturing, industrial and construction sectors — has still not improved substantially. Neither has the demand for electricity. Coal as a baseload fuel for power generators won back market share by being competitive with natural gas for the moment and the natural gas futures signal that this trend will likely continue. From a regulatory standpoint, nothing has changed. President Obama's "War on Coal" rages. There is talk among coal-state politicians, but talk is cheap. The Environmental Protection Agency (EPA) has steam rolled future coal-fired power generation and is now setting its sights on existing installations. Every January, 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 Figure 1—Production, Consumption & Attitude operators. Using that information, and data 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 4% for 2013 or 41 million tons from 1,016 million tons to 975 million tons. Total U.S. coal production fell by 2% in 2013, or 21 million tons, to 996 million tons. While this is not great news, it beat the forecast and observers should not lose sight of the fact that the U.S. still mined nearly 1 billion tons of coal last year. In addition to supply and demand fundamentals, the survey asked coal operators about their feelings, the amount of money they plan to spend this year, and how they intend to spend it. Coal operators are Figure 2—Capital Expenditures How will the mine spend the money? What is the capital expenditure budget for 2014? Less than $10 million 33% $10-$25 million 15% $25-$50 million 17% $50-$100 million 15% More than $100 million 20% For 2013, did capital expenditures: Increase No change Decrease 24 www.coalage.com 24% 20% 56% January 2014

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