Despite a pullback in export demand rippling through the broader U.S. coal market, top producers in the Northern Appalachia Basin cumulatively held production levels pretty flat year over year in 2019.
The top 25 coal miners in the region by production produced about 94.5 million tons of coal in Northern Appalachia in 2019. That is a 1.7% increase compared to 2018 levels at the same mines, an S&P Global Market Intelligence shows.
Consol Energy Inc. owns the Bailey mine, the largest coal producer in the area by volume. Bailey is part of the Pennsylvania mining complex that includes the Enlow Fork and Harvey mines.
Together, the mines produced about 27.3 million tons of coal in 2019, down just slightly from 27.6 million tons of coal produced in the year-ago period.
"2019 was a very difficult year for our industry in general, as we continue to see degradation in commodity prices, which then translated into declining stock prices and deteriorating access to capital markets," Consol President and CEO Jimmy Brock said on the company's fourth-quarter earnings call before noting Consol's operations defied broader sector trends. "From a marketing perspective, we continue to maintain 100% of our existing customer base and to selectively expand by taking market share."
Murray Energy Corp. is a major coal producer in Northern Appalachia and is going through a bankruptcy restructuring. It reported about 40.3 million tons of coal production across six of its top mines in the region, decreasing slightly from 40.5 million tons in the previous period.
Production from each of the company's longwall coal mines was relatively stable from 2018 to 2019, with the greatest percent change occurring at the Harrison County mine. There, production declined by about 5.6% to 6.8 million tons.
In a bankruptcy court declaration filed by Murray Energy Holdings Co. President, CEO and CFO Robert Moore in October 2019, the executive pointed to falling demand across U.S. coal producers' conventional markets as the cause of the company's recent financial distress.
"The impact of depressed demand and pricing in both domestic and international markets has hit Murray hard in recent months: customers with pre-existing commitments have simply refused to accept delivery, and with export markets closed there is simply no alternative market to place product, resulting in the temporary idling of mining operations," Moore wrote.
Alliance Resource Partners LP owns two of the top-producing mines in the region, Tunnel Ridge and Mountain View. Together, the operations produced about 9.4 million tons of coal in 2019, up about 3.5% from 2018. Alliance Senior Vice President and CFO Brian Cantrell said on the company's fourth-quarter earnings call that even though deteriorating export volumes are impacting its Illinois Basin mines, the executives expect coal volumes to stay relatively stable in Northern Appalachia.
On the same call, Alliance President and CEO Joseph Craft summed up the year for coal producers as one with a positive start but a disappointing finish.
"Unfortunately, positive coal market fundamentals soon began to turn negative," Craft said. "As the year progressed, the international coal markets deteriorated significantly as weak power demand in Europe, aggressive Russian coal production and collapsing LNG prices all contributed to a significant drop in [thermal coal export prices] since the beginning of 2019."
Arch Coal Inc. also has two top-producing coal mines in the region, though both mines produce metallurgical coal. Production at the company's Leer coal mine rose 24.1% year over year in 2019 while production at its Sentinel mine fell by about 5.4%. Arch is in the process of building out Leer South. Executives at Arch expect the metallurgical coal mine to essentially be a "carbon copy" of their successful Leer mine.
"The impact of Leer South on earnings and cash generation should be profound. Even at today's relatively depressed metallurgical pricing levels, we would expect Leer South to contribute an estimated $150 million in incremental EBITDA annually and substantially more than that during other points in the cycle," Arch CEO John Eaves said. "That kind of step-up will be transformational for our shareholders."
Contura Energy Inc. produced about 6.6 million tons of coal from its Cumberland mine in 2019, up 2.7% from 2018.
Other companies owning top-producing coal mines in the region include Rosebud Mining Co., Quintana Capital Group GP Ltd, Atlantic Carbon Group PLC, JSC System Capital Management and AK Steel Holding Corp.