Thursday, May 29, 2008

King Coal Watch or Will the Web save the mining industry?

How desperate is the coal industry for workers? Adfreak details an ad campaign designed by local ad agency Blattner Brunner (which as disclosure I consulted for briefly many years ago) to recruit miners for Consol Energy. The web site used for recruiting is online here, and really does not seem like the way to target future miners. The question then is whether this reflects the changing mining workforce? or the potential mining workforce of the future? or something else.

The need for workers in mining is not surprising given the trend in energy prices all around, but the spike in energy prices is really setting the already tight coal industry on its head. Globally no less. From the NYT last week is this story on the revival of a long quiescent coal industry in Japan, see: As oil prices rise, nations revive coal mining in the NYT and IHT.

If long closed coal mines are opening up in Japan, what does it say about what will be happening in Greater, greater Pittsburgh. Lots of coal as you head into the Pittsburgh countryside and beyond. The spot market for coal is actually defined right down the Ohio River (technically, about 107 miles down river, but close enough to be included in 'Greater' Pittsburgh) in the form of the Big Sandy Central Appalachian Coal Futures market as traded on the NY Mercantile Exchange (NYMEX). While it does not make as much news as say the daily spot price for oil, the time series for the Big Sandy Coal contract sure looks much the same, and has been frightfully meteoric in just the last couple months. What is interesting is that within the US it is Appalachian region coal that has seen the biggest price increases in the last 6 months going from under $50/ton in October to over $100/ton of late.

In one sense, the spot market for coal is not as big an issue as oil prices because a lot of coal supply gets delivered as part of very long term contracts with the biggest users which isolates them from this short term volatility. Yet the converse of that is a bit scary in that it means any new contracts that get let at current prices are likely to lock in higher prices for quite a while. Add it all up and you get some interesting times for the local coal economy. It's both a regional and national issue, but also a very local issue as many communities have seen real impacts of coal price spikes in recent decades.