Pace of mine idlings slows in H1'14, but Appalachian mines still impacted

The number of coal mines idled in the first half of 2014 slowed compared to second half of 2013, due in part to cold winter weather in early 2014 providing support for a rise in prompt month prices for Powder River Basin and Central Appalachia coal. Although the total number of mines idled in the first half of 2014 was only 64 — compared to 112 in the second half of 2013 — Appalachian mines again shouldered most of the burden.

According to production data from the U.S. Mine Safety and Health Administration, mines idled in the first half of 2014 produced a combined 2 million tons of coal in the 12 months ended June 30. Among the mines idled during the period, surface mines were the most impacted, with 51 idled, followed by 11 underground mines and two mine facilities.

Unsurprisingly, Central Appalachia experienced the largest number of mines idled during the first half of 2014 at 38. The region continues to be assaulted from all sides as generators turn to cheaper coal from other basins, metallurgical coal prices remain depressed despite production cuts, and decreasing coal seam thickness hampers production.

The Central Appalachian mines idled for the period accounted for almost 76% of all coal production from idled mines.

Northern Appalachia was a distant second, with 23 mines idled during the period that were responsible for 292,594 tons of coal produced for the 12 months ended June 30. While coal from the region has become more sought after due to its lower cost, Northern Appalachia still faces difficulties due to its abundance of met coal deposits.

By state, Kentucky experienced the largest number of idled mines in the first half of 2014 with 21 of the 64 total mines idled during the period located within the state. Although Kentucky experienced the most closures, impacted production was relatively small, with only one mine producing over 100,000 tons for the 12 months ended June 30, 2014.

West Virginia experienced the largest impact for 12-month production from idled mines as of June 30. Only 12 mines were idled in the state during the first half of 2014, but these accounted for 664,521 tons of coal produced during the period.

Producers with the greatest exposure to Central Appalachian coal topped the list of largest companies by production idled in the first half of 2014. Alpha Natural Resources Inc. idled the largest amount of production in the first half of 2014, based on production in the 12 months ended June 30. Cedar Grove No. 1 and Tower Mountain accounted for the lion's share of idled production with 292,285 tons and 175,744 tons, respectively. Coal mine idling for the Virginia-based company will most likely continue. On July 31, Alpha announced the potential to idle 11 additional surface coal mines in West Virginia.

Oxford Resource Partners LP was the second company behind Alpha with impacted production of 137,232 tons due to idling in the first half of 2014. Halls Creek in Muhlenberg County, Ky., accounted for all of the impacted production at the company. The mine was idled for both quarters of 2014, in accordance with the company's plan to idle all mines in the Illinois Basin producing region.

The largest mine idled in the first half of 2014 in terms of production for the 12 months ended June 30 was Cedar Grove No. 1 in Central Appalachia. The mine produced 292,285 tons of coal in the 12 months ended June 30. Owned by Alpha Natural Resources, the mine is in Logan County, W.Va.

Behind Cedar Grove was Gobco No. 8, co-owned by Bobby Ketron and Jerry Farmer. Also located in Central Appalachia, the mine produced 243,745 tons of coal in the 12 months ended June 30.

The 64 mines that were idled during the first half of 2014 employed 449 workers, based on average number of employees at the mines for the 12 months ended June 30. According to a recent SNL Energy analysis, the average number of coal mine employees nationwide in 2014 fell about 7% compared to the same quarter a year ago.

The Cedar Grove No. 1 mine also had the highest average employment of any of the mines idled in the first half of 2014 with 49 employees over the 12-month period ended June 30.

System Capital Management's Josephine No. 3 was the second-largest idled during the half of the year, based on average employee count. The Central Appalachian mine employed an average of 37 workers and produced 81,947 tons in the 12 months ended June 30.

Only mines with production in the 12 months ended June 30 are included in this analysis. Mines idled in first quarter 2014 include mines that had an active status as of fourth quarter 2013 and an active or permanently closed status as of second quarter 2014 but had a temporarily closed status for first quarter 2014. Mines idled in second quarter 2014 include mines that were active in first quarter 2014 but had a status of temporarily closed for second quarter 2014. Mines idled in both first and second quarter of 2014 include mines that were active in fourth quarter 2013 but had a status of temporarily closed in first and second quarter 2014.