September 08, 2008

US coal industry benefiting from better domestic consumption - Fitch

Fitch Ratings recently said that fundamentals for the US coal industry are benefiting from improved domestic consumption after a weak period, greater exports and declining production in high cost basins.

Fitch said that “The outlook for the US coal industry is stable. However, regulatory uncertainty about carbon emissions has stalled plans for many new coal plant builds which will cap domestic demand in the medium term.”

Fitch said that the margin expansion will also be difficult in 2008 given that cost inflation is not expected to be offset by productivity gains.

The ratings agency added that spot pricing is firming in central and northern Appalachia given production declines and some production going to the export market. European demand for high British thermal units US steam coal is proving robust in the longer term as two and three year transactions are being completed.

Fitch said it believes that the metallurgical coal market will continue to benefit from tight supply and robust steel demand over the next 12 to 18 months.