Massey plans to focus on metallurgical coal, exports
September 06, 2007 3:55 PM
Massey Energy is making a big bet on metallurgical coal.Chief Executive Don Blankenship told investors today that Massey is going to up production of so-called met coal. And the Richmond, Virginia-based company intends to cut back on high-production longwall mines.
By changing focus, Massey is gambling the price of met coal stays high. Met coal produced more than 72 dollars a ton in revenue for Massey in the second quarter, compared with a bit over 45 dollars a ton for coal sold to electric utilities.
Blankenship says several factors suggest met prices will remain high. World demand for steel is expected to increase, shipping bottlenecks are limiting exports from coal-rich Australia, and the weak U.S. dollar and high ocean freight rates favor US exports.
If met prices rise, Blankenship believes Massey is positioned to cash in because two-thirds of the met coal it expects to mine next year and in 2009 hasn't been priced.