Central Appalachia Productivity

Editor’s Note: This is the first in a series of articles presented 

by Weir International Mining Consultants for Coal Leader 

relating to the U.S. coal industry.

Coal Mine Productivity

    Annual productivity at U.S. coalmines increased every year between 1978 and 2000. However, productivity decreased in both 2001 and 2002 (September year to date). Productivity from Central Appalachia (CAPP) coal mines exhibited the same productivity trend as for the U.S. CAPP surface mines and underground mines both experienced productivity decreases in 2001 and 2002 as shown in Figure 1.

    Approximately 80% of CAPP surface mines and 69% of CAPP underground mines experienced decreases in productivity in 2001 and 2002 compared to 2000. The decrease in productivity at the surface mines was more severe (-18%) than at underground mines (-9%). Productivity statistics for large CAPP surface and underground mines are shown in the table.

Explanations for the decrease in productivity include the following:

• Environmental restrictions (eg.valley-fill and mountaintop removal limitations)

• Regulatory restrictions including truck weight limitations
• Reserve degradation (mining the “best of the rest”) including decreased preparation plant yields and      increased stripping ratios
• Impact of coal price fluctuations, reduction in production shifts at certain mines and voluntary reductions in total production.

Relationship of CAPP productivity and coal prices

    CAPP F.O.B. mine prices steadily decreased from 1991 through 2000, but surged in late 2000 and 2001. The price increases continued through 2002, primarily as a carryover of contract prices established in

2000 and 2001.

The relationship between F.O.B. mine prices and productivity for the period between 1991 and 2002 is shown in Figure 2, and may be the result of the following factors.
• During periods of low prices, focus is on cost reduction and productivity gains
• During periods of high coal market prices, less efficient coal mines and producers can survive.

Future for CAPP 

    Barring any external influences, such as natural gas shortages or curtailment of all imports, the U.S. Department of Energy (DOE) projects that 2003 CAPP coal prices for new sales are expected to return to 2000 levels, adjusted for inflation, and will remain relatively flat for the next ten years. DOE also forecasts that demand for CAAP coal will decrease by 6% for the next ten years. Less efficient mines are unlikely to survive the double hit of lower coal prices and less demand. For professional advice contact Weir International Mining Consultants at 630-968-5400.    cl

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