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Mine idling slows in H2'16 as industry shows signs of turnaround

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Mine idling slows in H2'16 as industry shows signs of turnaround

Mine idling slowed in the second half of 2016 compared to the preceding six months, providing more evidence that the coal industry is beginning to recover from difficult times.

Coal mines in the U.S. that were idled in the second half of last year produced about 2.4 million tons in 2016. This is down slightly from the roughly 2.5 million tons produced in the preceding 12 months by mines that were idled during the first two quarters of last year. Some uncertainty remains about the turnaround, however, as 25 mines were idled in the fourth quarter of last year compared to 10 in the third quarter. An additional thirty-three mines were idled for the entire second half of 2016, according to data compiled by S&P Global Market Intelligence.

Central Appalachia suffered the most in terms of production and mines lost. The region saw 40 mines idled in the second half of 2016, which totaled a loss of nearly 1.5 million tons of production based on 2016 numbers.

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Twenty-seven of those mines were based in Kentucky, which saw a loss of nearly 1.1 million tons produced in 2016 due to idling. In the second half of last year, West Virginia saw nine mines idled that produced 368,670 tons of coal in 2016. The second-largest mine to go idle in the CAPP region was the Wakenva Prep Plant owned by Omega Holdings LLC. That operation, which was idled during the fourth quarter, produced 314,273 tons in 2016.

J. Tyler White, president of the Kentucky Coal Association, told S&P Global Market Intelligence that the state saw a 28% drop in production from 2015 to 2016. While the state's idlings increased in the second half from the first half in both numbers and production, White said the situation should change moving forward. "We've been very optimistic in our reactions in watching what policies have come out of Washington in the first quarter that are going to help this industry compete once again without being regulated," he said. "We see that optimism in the way that coal companies have been posturing themselves in this first quarter of 2017."

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One of the biggest mines idled in Kentucky is in the Illinois Basin. Alliance Resource Partners LP's Elk Creek mine was the largest producing mine in 2016 that was idled during the second half, with an output of 441,044 tons. Alliance mentioned in an earnings report last year that Elk Creek's resources were depleted.

While the Illinois Basin saw only four mines idled in the second half of last year, those mines accounted for 568,099 tons of lost production based on 2016 totals. The Freelandville West Underground mine in Indiana, owned by JMP Holdings LLC, T A Potter Enterprises LLC, JMP Coal Holdings LLC and RWE Aktiengesellschaft, produced 123,078 tons in 2016. Those owners idled two large CAPP mines in Kentucky in the second half as well: Thunder Ridge, which produced 106,092 tons, and Poundmill Mine No. 90, which produced 88,989 tons in 2016.

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Seventeen mines were idled in Northern Appalachia in the latter half of 2016, with a total 2016 production of 170,078 tons. Sixteen were in Pennsylvania, which saw 164,658 tons of 2016 production go offline during the second half. The other idled NAPP mine was in Maryland.

Four idled NAPP mines were owned by Rosebud Mining Co., a producer that also idled a half-dozen mines in the first half of 2016. Rosebud announced that it was reopening one of its mines in December due to a recovery in the metallurgical coal market.

Three mines were idled in Southern Appalachia, all in Alabama. Two were idled in the Gulf Coast and one each in the Uinta Basin and in the Interior.

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