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Early coal data a glimpse of shrinking production through H1'16

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Essential Energy Insights - January 2021


Early coal data a glimpse of shrinking production through H1'16

Early coal mine production data suggests production isdown another 3.8%compared to the prior quarter and down 16.2% compared to the year-ago period.

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S&P Global Market Intelligence's analysis of early coalmining data published by the U.S. Mine Safety and Health Administrationincludes 204 coal mines that reported coal production of 64.2 million tons inthe second quarter so far. According to complete first-quarter data, 577 coalmines reported 173.1 million tons of production in the prior period.

U.S. coal production cuts are currently on pace to hit arecord in 2016.Headwinds created bynatural gas competition, regulations and tempered power demand has pushed coalprices to bankruptcy-inducing levels.

Analyst Lucas Pipes with FBR & Co. recently coal inventories atU.S. utilities could return to normal levels by 2017 and offer price to producers.

"Withhigher natural gas prices and weather beneficial to greater coal burn, we expect coalconsumption to regain some market share in the second half of the year,"Pipes wrote. "While the increase in domestic coal production does not helpthe speed of a recovery,we believe that domestic utility inventories are still likely to decline in thecurrent natural gas price environment, even on the more recently increased coalproduction levels."

Comparing mines that have reported in the second quarter toproduction from the same mines in the prior quarter shows production has fallenin most major U.S. coal basins.

Data for Northern Appalachia, where a large share of mineshave already reported, shows those mines produced about 7.9% more coal than in the prior period.Meanwhile production at early-reporting Northern Powder River Basin mines aredown 17.1% and Southern Powder River Basin mines have produced about 16.3% lesscoal. Production from early-reporting Illinois Basin mines is down 6.2% quarterto quarter while Uinta Basin coal production has increased 31.2%.

The most productive mine to report so far is 'sEagle Butte mine. It reported production of 4.3 million tons in the secondquarter compared to 3.9 million tons in the prior quarter. Production at EagleButte is still down from 4.9 million tons in the year-ago period.

Meanwhile, Alpha's other Wyoming coal mine, Belle Ayr, sawproduction fall from 3.6 million in the first quarter of 2016 to just 2.7million tons in the second quarter. Alpha's Cumberland mine in NorthernAppalachia increased production from 1.6 million tons to 2.2 million tons.

CONSOL EnergyInc. decreased production at two of its large Northern Appalachiamines in the period. According to the analysis, CONSOL's Bailey mine produced2.7 million tons in the recent period compared to 2.8 million in the priorquarter. Its Enlow Fork mine produced 2.4 million tons in the second quartercompared to 2.5 million tons in the prior quarter.

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