Major U.S. Coal Producers Temper Capital Spending Programs in 2007

---

Researched by Industrial Info Resources (Sugar Land, Texas). After a period of significant capital spending and new mine planning (2004-2006), U.S. coal producers are planning equal or reduced capital spending budgets for 2007. Major new mines and mine expansions that have been planned during the last two years are being deferred until market conditions improve. However, there will still be a significant amount of capital spending at U.S. coal mines this year. Three of the largest coal producers, Arch Coal, CONSOL Energy, and Peabody Energy together are planning in excess of $1 billion in capital projects in 2007. Industry wide, coal mining firms are planning more than $5 billion in future expenditures from more than 40 projects scheduled to begin construction in 2007 or beyond.

Click on the image at right to view a breakdown of coal mine project spending by market region

Coal prices dropped during 2006, due, in part, to moderate temperatures this winter, which curbed demand. Market conditions could turnaround quickly due to the short-term nature of the current soft market for coal. Coal producers in turn are proceeding with cautious optimism in 2007, limiting production growth in order to rectify the coal price situation. In the long run, development of IGCC, coal-to-liquids, and coal-fired power plant construction will help boost capital spending at U.S. coal mines.

For the most part, 2006 was good to coal companies, most of which posted positive growth and improved net income.

Peabody Energy (NYSE:BTU ) (Saint Louis, Missouri) announced that planned capital expenditures in 2007 will be on par with 2006 in the range of $450 to $525 million.

Arch Coal is reducing its capital spending plans in 2007 to around $240 to $280 million. Arch reopened two mines in the Rocky Mountain region in 2006 including the Coal Creek mine in Wright, Wyoming, which reopened on November 5, 2006. Arch will bring the $300 million (of which $110 million will be allocated in 2007) Mountain Laurel coal mining project into operation during the fourth quarter of 2007. Located near Sharples, West Virginia, Industrial Info first reported on Mountain Laurel in 2004.

CONSOL Energy is planning about $360 million for capital expenditures in 2007. This is down from $490 million in 2006.

Check out Industrial Info’s Coal Industry Wall Map by click on the image at right.

Industrial Info Resources (IIR) provides marketing communication services ranging from industrial database solutions to market forecasting, custom analytics, and specialty promotions that support high-level image campaigns.