Several trends have characterized the U.S. coal industry and induced significant changes in recent years, according to The U.S. Coal Industry in the 1990s: Low Prices and Record Production, new from the Energy Information Administration. Rising demand for low-cost fuel for electric power generation supported continuing increases in demand for coal. Coal production and productivity rose steadily from 1986 through 1997 while prices fell (see figure). Stiffer competition and consolidation in the coal industry led to increases in the average size of producing mines, even as the total number of mines declined. Competition and low prices also encouraged reductions in holdings of recoverable reserves.

Industry changes accompanying these trends include the following:

U.S. Coal Production, Productivity, Prices, Reserves, and Sulfur Content, 1986-1997, Indexed Note: Average mine prices are indexed to constant dollars. Average sulfur content is based on coal delivered to electric utilities, reported on Form FERC-423. Source: Energy Information Administration

• Increased average mine size. In 1986, the average size (expressed as output)of the 4,424 active U.S. mines was 201 thousand short tons per year. By 1997, the number of mines had fallen to 1,828 while average size had nearly tripled, to 596 thousand short tons per year.

• "High-grading" of recoverable reserves. Partly in response to falling coal prices, operators of all sizes of mines have tended to reduce their holdings of coal reserves that are less profitable to exploit. Reductions between 1991 and 1997 range from 6 percent among large mines to 62 percent among small mines, which tend to be less productive.

• Concentration of productive capacity. While low prices tend to discourage large reserves holdings, they may promote investment in production capability. The share of productive capacity held by the largest producers rose steadily from 1986 through 1997.

• Productivity gains. With increases in average mine size have come improvements in coal mine productivity, expressed as short tons per miner hour. Mines in the Western region have been more productive than those in the Interior or Appalachian regions, but productivity in all three regions rose sharply during the period.

• Increased competition. In the 1980s and 1990s, several factors have raised competitive pressures within the U.S. coal industry, including generally falling natural gas prices and head-to-head competition among coal operators in the three U.S. coal-producing regions and, to some extent, from overseas producers.

The business climate within which the coal industry operates is also changing, including its structure and its marketing and operational activities. Railroad deregulation and consolidation and clean-air laws favoring low-sulfur coal have encouraged growth in Western regional coal output. Deregulation of the electric power industry has promoted competition and cost-cutting measures by electric utilities, such as reductions in plantsite coal inventories, increasing the importance of reliable transport. Low coal prices and tight profit margins have restricted the flexibility of all but the largest operators, and the industry is increasingly dominated by large operations and large corporations, whose size helps enhance productivity.

The U.S. Coal Industry in the 1990s: Low Prices and Record Production, DOE/EIA-0631; 21 pages, 8 tables, 10 figures.

Contact:

Richard Bonskowski, Office of Coal, Nuclear, Electric and Alternate Fuels

richard.bonskowski@eia.doe.gov

Phone: (202) 426-1132

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