Massey Energy Co. is preparing its first metallurgical coal shipment to China as part of its efforts to capitalize on growing demand from Asian steelmakers, an executive with the Virginia-based mine operator said Tuesday.
While China represents a huge market, much of the coal it imports comes from Australia. Massey sees greater promise in India, company vice president Mike Bauersachs said during a presentation at the Raymond James Institutional Investor Conference in Florida.
“We’ll probably ship a couple million tons of coal in there next year,” Bauersachs said. “India could surpass China in met coal imports this decade.”
Massey and other American producers have been trying to capitalize on growing metallurgical coal demand as Asian economies recover more quickly than the U.S. economy. Prices have begun to rise, with Australia’s BHP Billiton recently striking a deal for $200 a ton. For Massey, Bauersachs estimates that translates to $110 to $140 a ton, given the added shipping distance from its met coal mines in West Virginia.
Massey announced in January that it planned to invest $160 million to start developing a mining complex capable of producing 2 milion tons of metallurgical coal annually. At the same time, the company also announced a deal with India’s Jindal Steel & Power to work together on developing mines in Asia, Australia and the United States.
Massey has a similar deal in place with Indian conglomerate Essar Group, which recently agreed to buy a West Virginia based mine operator with 200 million tons of reserves for $600 million to secure access to metallurgical coal.
Growing Asian demand also figures to benefit Massey and other U.S. producers by reducing the amount of Australian and South African coal available for steel producers in Europe and Brazil.
“We feel very good about our traditional markets and good about developing markets,” Bauersachs said.