
A pair of Illinois Basin coal miners eat during a break underground. Production in the region increased in 2017. |
The top coal mines in the Illinois Basin increased production 10.4% in 2017, a year in which several producers complained oversupply was keeping a lid on potential price improvement.
Output from the top 25 coal producers in the basin was 94.2 million tons in 2017, up from 85.3 million tons from the same producers in 2016, according to a recent S&P Global Market Intelligence analysis. Fourth-quarter production from those mines was 22.2 million tons, down from 22.5 million tons in the year-ago period and 22.3 million tons in the prior period.
Recent consolidation in the basin could take some pressure off coal producers in the region.
Murray Energy Corp. adjusted production at its own individual mines after taking a major interest in Foresight Energy LP. That could go further as Murray awaits the closing of a deal that will give it full control of Armstrong Energy Inc.
"In the past year, Murray Energy has taken about 15 million tons of steam coal out of the marketplace with the closing of our Powhatan No. 6 Mine of The Ohio Valley Coal Company in Ohio and the New Era and New Future Mines of American Coal Co. in Illinois," Murray Energy CEO Robert Murray said in prepared remarks for a Feb. 1 conference. "The acquisition of Armstrong Coal Co. by Murray Energy, announced late last week, will further this consolidation."
Murray also said there is a tightness of coal supply in both the Illinois and Northern Appalachia basins that is consistently bringing pricing in at the "lower end of the range" of projections by trade publications.
One coal producer with operations in the region recently told S&P Global Market Intelligence that it is seeing utility customers moving requests for proposals for coal purchases forward due to recent cold weather. That producer also said export markets, which several companies have said had been an outlet for excess coal in the region, have stayed strong in recent months, keeping prices relatively stable and higher than where they were last year.
The top-producing mine in the region, Foresight's MC No. 1, increased its annual production by 12.0% to 12.8 million tons year over year. Foresight also increased production at its Mach No. 1 mine by 17.3% in the period.
On a recent earnings call, Alliance Resource Partners LP President and CEO Joseph Craft III said pricing has improved in the region in recent weeks. The company boosted production at its large River View mine 4.1% in 2017 and saw vastly improved production volumes from its Gibson South mine and Mine No. 1 operations. Production declined at Alliance's Cardinal and Dotiki mines.
"When we look at the market, it is definitely better today than it was just three months ago," Craft said.
Alliance, with mines in both the Illinois and Northern Appalachia basins, reported that recent cold weather increased customer demand and reduced utility stockpiles. Craft said favorable weather patterns are expected to keep coal burn strong, and he expects customers will soon come to the market looking for commitments for 2018 and 2019 coal volumes.
Craft noted that Alliance would be "looking at assets" for potential mergers and acquisitions activity in regions including the Illinois Basin.
Peabody Energy Corp. increased production at its Lively Grove, Gateway North, Francisco and Wild Boar mines in the Illinois Basin. It lowered production from its Bear Run, Somerville Central and Wildcat Hills mines.
The company, which operates one of the largest mines in the U.S. in Wyoming, noted on its Feb. 7 earnings call that the Illinois Basin offers the company opportunities to export its coal given that part of the portfolio's access to ports and margin realizations.
Hallador Energy Co. increased production at its Oaktown Fuels No. 2 mine in 2017 but decreased production slightly at its Oaktown Fuels No. 1 mine.

