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Uinta Basin coal production edges up 6.6% QOQ in Q3'20

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Uinta Basin coal production edges up 6.6% QOQ in Q3'20

Coal production in the Uinta Basin jumped 6.6% in the third quarter of 2020 compared to the previous quarter but remained lower than prior-year figures, in line with other basins appearing to return from diminished second-quarter totals sapped by the coronavirus pandemic. The Uinta Basin straddles the border between Colorado and Utah.

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Output from the 10 active mines in the basin reached 5.5 million tons in the third quarter, rising from 5.2 million tons produced in the previous quarter and dipping from 6.0 million tons produced by the same mines in the third quarter of 2019, according to data compiled by S&P Global Market Intelligence.

Production in the basin totaled 22.0 million tons for the 12-month period ended Sept. 30, decreasing by 14.5% year over year from 25.8 million tons. Fewer mines operated in the basin for the second consecutive quarter, dropping from 12 active mines in the first quarter and 11 active mines in the second quarter.

Half of the mines operating in the basin in the third quarter experienced declines in production compared to the second quarter. The basin's quarterly production total was lifted by the Wolverine Fuels LLC-operated Sufco mine in Utah ramping up. The mine was the largest producer in the basin in the third quarter with 1.4 million tons of output, a 60.8% increase from the preceding quarter. The Wolverine-run Skyline No. 3 mine in Utah was the second-largest producer in the quarter at 996,000 tons, a 22.2% leap from 815,000 tons in the second quarter.

The basin also benefited from the return of Peabody Energy Corp.'s Foidel Creek operation in Colorado, also known as Twentymile. Output from the mine declined dramatically in the second quarter to 34,000 tons after the company announced it would furlough half of the workforce due to low coal demand. But production climbed back in the third quarter to 492,000 tons, an 8.0% uptick from 456,000 tons produced in the prior-year period.

Peabody Energy, the world's largest private coal company, recently warned of its second potential bankruptcy in five years due to the demand crash created by the coronavirus pandemic. While the company saw early evidence of market recovery in the third quarter, it is "cautiously optimistic that improvements can be sustained" amid surging COVID-19 cases around the world, Peabody Energy President and CEO Glenn Kellow said on a Nov. 9 earnings call.

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.

Arch Resources Inc.'s West Elk asset in Colorado came in third in terms of quarterly output in the basin. West Elk produced 578,000 tons, an 11.7% decline from the prior quarter and a 53.3% drop from the prior-year period.

The future of West Elk was cast in doubt in late September when Arch and Peabody lost a court fight with the U.S. Federal Trade Commission over clearance for a proposed joint venture that included the mine and various properties in the Powder River Basin. An expansion of the West Elk mine has also received some pushback after reports that an Arch subsidiary conducted road work on the project in apparent defiance of a court order.

Arch CEO Paul Lang said on an Oct. 22 earnings call that smaller companies may be interested in procuring West Elk as the company accelerates its departure from thermal coal. "West Elk ... has a history of some years, especially when the export market is down, West Elk struggles. I think it will continue to do that," Lang said. "West Elk is probably the one that has a smaller base of people that may be interested, but at the same time, it has great option value."

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