News: War in Ukraine adds to demand

More news to digest as we await the inevitable climb to $3.00...imoho

Virginia’s Buchanan Mine No. 1, operated by Coronado Global Resources, was the largest coal producer in the Central Appalachian region during the first quarter of this year and has significantly ramped up production of PCI material, according to S&P Global.

War in Ukraine adds to demand already bolstered by higher steel production

BY: SARAH VOGELSONG - JUNE 8, 2022 12:03 AM

A CSX train hauls coal near Texas Beach along the James River in Richmond. (2019 photo by Robert Zullo/ Virginia Mercury)

Virginia coal production remains high, fueled by ongoing demand for steel as the U.S. embarks on an ambitious program of infrastructure investment and disruptions in energy markets linked to the war in Ukraine.

Today, most of the coal produced in Virginia is metallurgical, a high-quality form of coal used for steelmaking.

“Overall, demand for metallurgical coal is on the rise,” said Ben Beakes, president of the Metallurgical Coal Producers Association, the successor organization to the Virginia Coal and Energy Alliance. “Demand levels are some of the highest the industry has seen in many years.”

U.S. Energy Information Administration data show significant increases in Virginia production of coal overall. The agency’s June 2 weekly report found that compared to this time last year, the commonwealth’s production was up 15.5 percent. Within the broader Appalachian region, production is up 8 percent overall.

The uptick is not unexpected: beginning late last summer, the Virginia Department of Energy began receiving a wave of applications for new mining permits and licenses to sell coal.

Many of the trends cited by Beakes to explain the increase in mining activity in November still are in play, he said. The world’s emergence from lockdowns instituted in response to the COVID-19 pandemic is driving increased coal production as economies come back to life, while the federal Infrastructure Investment and Jobs Act is expanding the market for steel, a material largely produced using metallurgical coal.

Russia’s war against Ukraine is also contributing to higher demand for Virginia coal because some of the state’s mines produce a particular type of metallurgical coal — known as pulverized coal for injection, or PCI — that steel manufacturers previously sourced from Russia.

“Some of the coal in Virginia can qualify for PCI-grade coal,” said Beakes. “So there is some of that coal on the export market that Virginia is taking advantage of.”

Virginia’s Buchanan Mine No. 1, operated by Coronado Global Resources, was the largest coal producer in the Central Appalachian region during the first quarter of this year and has significantly ramped up production of PCI material, according to S&P Global.

The increase in coal activity has impacts beyond the state’s coalfield region.

More coal is exported from Norfolk than from any other port in the U.S. According to data released by the U.S. Energy Information Administration this April, roughly 60 percent of U.S. metallurgical coal exports came out of Norfolk.

The same report found that Norfolk’s metallurgical coal exports were over 15 percent higher at the end of 2021 than they had been at the end of the prior year.

This February, coal exports from Norfolk’s three terminals — operated by Dominion Terminal Associates (co-owned by coal companies Arch Resources and Alpha Metallurgical Resources), Norfolk Southern and Kinder Morgan — hit their highest level in three years. Consultancy Argus Media reported that the largest increases occurred at Kinder Morgan’s Pier IX.

Company spokesperson Amy Baek said in an email that the company doesn’t have a comment on increases in metallurgical coal exports.