Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Years of declining efficiency in the coal industry may be finally coming to an end, especially in the U.S., where miners based in the country’s top producing regions have stabilized or even increased productivity at both surface and underground coal operations in the past two years, a study shows.
According to SNL Energy’s latest report, coal mine productivity — a measure of the clean tons of coal a mine produces per employee hour — has increased even in regions where output has fallen, such as in Central Appalachia, where most of the U.S. coal is produced.
But a large gap still exists across the basins regarding average coal miner productivity, the study shows:
In Central Appalachia, the average underground coal miner produced about 1.37 tons of coal per hour in the recent quarter, while in the Illinois Basin, coal was produced at a rate of about 4.51 tons of coal per man-hour from underground mines. Central Appalachia’s surface mines produced coal at a rate of 3.23 tons per man-hour, while the relatively freshly tapped strip mines of the Powder River Basin produced an average of 30.16 tons of coal per man-hour in the same period.
U.S. coal prices have declined over 15% in the past 12 months. And more pain may be coming as this year power companies are expected to retire substantial coal-fired generation capacity from the grid, mostly because of environmental regulations, the Energy Information Administration said earlier this month.
The forecast coincides with Wood Mackenzie’s latest predictions. According to the intelligence firm, almost 17% of coal production this year in the U.S. could be at risk of idling or closure, as total cash costs plus sustaining capital expenditures exceed current market prices.
Comments
rockhound17
As an Engineering Geologist my first major position was in the coal mining industry. I grew up in East Tennessee near Kentucky and Virginia. I graduated from the University of Tennessee in 1979. The Coal Industry was begging for Engineers and Geologist. Jobs were plentiful. Coal was king at this time. Man I was a baby and had to grow up fast. I started straight out of College at $85,000 per year, a new company 4×4 truck and lots of perks that were just out of this world. This boom lasted till the mid to late 80’s and the bottom just fell out. All the larger companies began leasing their properties out to smaller mining companies on Contract Basis. These Contract Companies paid much lower wages and offered no perks as the larger companies had. This proved to be quite profitable and this trend continues today. Gone are the glory days of that period. Individuals like myself moved on to bigger and better positions as Engineering Geologist are quite adaptive to most any industry.