Consol Energy to add fifth longwall machine at local mining complex
November 3, 2021
Paul J. Gough
Pittsburgh Business Times
Consol Energy Inc. on Tuesday announced it will do something that would have been unthinkable a year ago: Adding an additional mining machine at its Pennsylvania Mining Complex in Greene and Washington counties, thanks to a revived coal market with higher prices and stronger demand.
It will be the first sustained mining at Enlow Fork, one of the three mines at Consol's facility, since it was temporary idled in April 2020 at the beginning of the Covid-19 pandemic.
Consol (NYSE: CEIX), which is based in Canonsburg, had a tough 2020 with the sharp drop in demand due to the pandemic along with sharp pullbacks in orders from the utility companies that make up the bulk of the company's U.S. customer base. But that's firmly in the rearview mirror as utility companies, which burn Consol's coal to generate electricity, are buying more coal than they did a year ago.
For 2022, Consol has seen its contracted tons move from 5.5 million tons sold in the early months of 2021 to 20.2 million at the end of October. It has also sold 5.8 million tons of coal in 2023, with more expected to be contracted in the next three months. Most of the contracted volume is among domestic producers and not internationally, which is about half of its coal production.
CEO Jimmy Brock said Consol has seen its customers willing to contract for more coal in 2022 and 2023. That's thanks to a robust market fueled by a stronger economy and not enough coal in inventory or able to be produced by existing mines.
"We feel good about our business as we head into 2022," Brock said Tuesday during Consol's third-quarter conference call with analysts.
Consol's Pennsylvania Mining Complex, the largest underground mining facility in the world, is in a good position to meet the demand. That's rare among coal companies, which have been squeezed by a lack of investment in a lot of new thermal coal facilities due to bankruptcies and concerns about the survival of the coal industry as well as a harder time for coal companies to gain access to capital.
Consol had, in better times, had a fifth longwall machine operating. It had idled its longwall machine when it idled the Enlow Fork mine in April 2020. Bailey and Enlow Fork, along with Harvey, make up the Pennsylvania Mining Complex. Now it's bringing that machine back into operation.
Consol employs longwall mining methods, which dig out a block, or panel, of coal about 1,000 feet wide and 2 miles long. The company, since it has run five longwall machines in the past, already has the equipment on hand. That means it will only have to refurbish the machine for its new use instead of buying a new one outright. That's the difference between $10 million in capital costs and a few million dollars, according to Consol.
But it won't help Consol sell more coal immediately: It will take up to a year before the preparation of the two panels and the longwall gets under way. But Brock and other Consol executives say they're confident there will be more coal demand in 2023.
"The world is energy short," Brock said. "We think the tightness in the market is going to remain there."
It could help Consol lift its total coal production to a little less than 2019's coal production, after a year-over-year fall of 31% to 18.7 million tons in 2020. That was the lowest volume of coal produced by Consol since 2013. Consol is projected to produce between 23.5 million and 24.5 million tons in 2021, a number that was hampered by geological challenges at its mining complex as well as delays in trains transporting the coal out of southwestern Pennsylvania.
A fifth longwall, along with the other longwall machines, could boost Consol to around 26 million tons of coal produced for 2023.
"We can be in that neighborhood there," Brock said. "It all depends on the market."