As steel demand rises, Virginia coal mining is on the upswing

Virginia is seeing an uptick in coal mining as demand for steel surges amid global economic recovery from the COVID-19 pandemic and federal plans for sweeping infrastructure investment. 

Since Aug. 10, the Virginia Department of Energy has received applications for 10 new licenses to sell coal and one request to reactivate an existing license. Seven new permits to mine coal are also under review, with 11 additional permits in the process of being transferred to new owners. 

Among the mines that have been restarted are the JMAC surface mine near Appalachia, now owned by Next Endeavor Ventures; JW Construction’s Hickory Gap Surface Mine; and the Osaka underground mine owned by INMET Mining. 

“Long story short, we are seeing more coal mining and planned coal mining based on the records in our office,” wrote department spokesperson Tarah Kesterson in an email. 

Virtually all of the coal linked to the new licenses and permits is metallurgical coal, used for steelmaking rather than power production, Kesterson confirmed. 

With power companies moving away from coal as a fuel due to both its costs and laws like the Virginia Clean Economy Act designed to transition the electric grid away from fossil fuels, metallurgical coal has assumed an increasingly important role in Virginia’s coal industry. 

“We believe that the future of our industry is with metallurgical coal,” said Ben Beakes, president of the Metallurgical Coal Producers Association, a Grundy, Va.-based industry group formerly known as the Virginia Coal & Energy Alliance. The group, which was founded by five major coal companies in the Appalachian basin, produced 43 percent of U.S. metallurgical coal in 2020. 

Among the factors contributing to the uptick in Virginia coal activity, Beakes pointed to the rising global demand for steel, a trade dispute between Australia and China that has led to greater U.S. export opportunities in the latter, and the $1.2 trillion federal infrastructure bill. 

“You cannot have infrastructure without steel,” said Beakes. “And so domestically, you’re going to see a prolonged increase of demand for steel, and therefore you will see what we think will be a prolonged demand for metallurgical coal.”

The American Iron and Steel Institute has estimated that the federal infrastructure bill will authorize approximately $850 billion in spending on infrastructure containing steel. Senior Vice President of Communications Lisa Harrison wrote in an email that the investment “equates to as much as 40-45 million tons of steel over the life of the projects.” 

Steel demand is already growing: the latest weekly report from the institute found that U.S. steel production this year has been 20 percent higher compared to production at this time last year.

Beakes said that coal producers would likely take a careful approach to rising demand. 

“Our history tells us that sometimes what shortens an uptick in the market is simply an oversupply of coal,” he said. “And so producers today, especially the metallurgical producers, are much more disciplined in how they approach the uptick in the market.” 

Coal mining, like many other industries, has had a rocky pandemic. Many Virginia mines temporarily closed in March 2020, including the state’s largest, the Buchanan No. 1 mine owned by Coronado Coal that employed 543 workers. Buchanan restarted operations June 1 of that year.