Australian Floods Bump Coal Prices In Central Appalachia.
Floods in Australia have caused a double digit jump in spot prices for coal. The price bump will temporarily help Ohio coal companies while hurting utilities and steel-makers. WOSU's Tom Borgerding reports.
The raging floods in Queensland, Australia have disrupted mining in one of the world's prime coal regions. And, Mike Carey of the Ohio Coal Association says the disruption is rippling through U-S and regional coal markets.
"Anytime you take away a large portion of the market, which is what you've seen in Australia, you see a demand for coals across, across not just this country but worldwide demand for coal." Says Carey.
The disruption of coal supplies in Australia will likely have most immediate effects on heavy industry, especially steelmakers, who use what's called "metallurgical coal" mined in that region. But, Eastern Ohio, Eastern Kentucky, and West Virginia also produce large amounts of the same type of coal.
"So you were definitely seeing the effects in the Appalachian regional markets."
During the past month, spot prices for Ohio and Central Appalachian coal have jumped about 10%. Some steelmakers might already be feeling the effects. A-K Steel operates mills in Middletown, Mansfield, Coshocton, and Zanesville. Last week, on its website, the company announced price increases for carbon steel because higher costs for "steelmaking inputs." Coal is a major raw material used to produce steel.
At Columbus-based American Electric Power, spokeswoman Melissa McHenry says the company has already purchased 90% of its coal needs for 2011. But, she says the utility is not completely shielded from coal price fluctuations.
"Now what the flooding in Australia does do is effect the market price for coal and we have seen an increase of about ten to fifteen dollars per ton in the market price for coals, particularly higher quality coals that come from the Appalachian region."
McHenry says AEP burns 750,000,000 tons of coal annually and coal costs for AEP will depend in part on what happens with the flooding in Australia, whether its a long term event or whether it subsides fairly quickly. Mike Carey at the Ohio Coal Association says effects of the Australian floods will linger.
"It will be quite some time, with the damage that has taken place there, at least a year."
Carey says Ohio currently mines 25 million tons of coal annually but has the capacity to produce much more.
Tom Borgerding WOSU News