2007 will be another good year for American mining, says the NMA

Few signs of a cooling US economy will show up in the nation’s mines this year, according to the National Mining Association (NMA) in its annual Economic Forecast for 2007. US coal production in 2007 is expected to set a record for the third consecutive year, as America’s power plants continue to rely on coal to generate more than half of the nation’s electricity. Global demand for copper and gold from US mines will also remain strong, with copper production increasing sharply over 2006 and gold enjoying its longest bull market in decades despite a slowing domestic economy and lower economic growth expected worldwide.

"These headline figures underscore the undeniable importance of both coal and mineral mining to the US economy and the continued vitality of our industry in a global market for energy and commodities," said NMA President and CEO Kraig R. Naasz. "This trend also reminds us of the consequences that are likely to arise from arbitrary restrictions on the production of US coal and minerals," he added.

US mines are expected to produce 1,061.2 Mt of coal in 2007, exceeding the previous record of 1,052 Mt set last year. Consequently, NMA projects coal will maintain a 50.5% of the electricity generation market that is expected to grow by 1.5% in 2007 with normal weather patterns.

NMA, which bases its coal forecasts on direct reports from member companies responsible for the overwhelming majority of US coal production, said companies in the Powder River Basin (PRB), the nation’s largest coal producing region, are already expected to ship more coal in 2007 than they produced last year. A 2.4% increase in western production, including the PRB production, is forecast largely owing to improved rail transport and will offset a slight decline in production from Midwest and Appalachian coal mines.

Coal use plus exports are expected to reach 1,079 Mt in 2007, nearly 19 Mt above the 2006 mark of 1,060 Mt. When inventory increases are added to actual coal use this year, total US coal demand will climb above 1,088 Mt, exceeding by 1.8% the record for total demand set last year. Power plants increased their coal inventories last year to levels higher than at any time since 1999. But NMA anticipates still more inventory build up in 2007, as utilities insulate themselves against unforeseen logistical problems and higher than anticipated burn rates.

While still accounting for a small percentage of US coal use, coal imports, primarily from Colombia, will continue to climb this year, owing largely to improvements made in US port facilities, said NMA. Exports of US coal are likely to decline in 2007 by nearly I Mt, according to association economists.

Coking coal used in steel production is expected to decline by 500,000 t this year, said NMA, owing to a slight decline foreseen in US and global steel production. This is triggered largely by falling automobile manufacturing in the US and as slower rate of construction growth in the developing world.

NMA agrees with metals and minerals analysts that 2007 will be another strong year for copper production, as continued strong demand from rapidly developing economies offsets sluggish demand from a slowing global economy. Unlike US coal production, which relies largely on domestic sales, US production of copper and other metals responds chiefly to prices set on the global market.

Global copper production will jump 6.8% in 2007 to 16.2 Mt, according to the International Copper Study Group. The projected increase, fed by stronger demand from developing countries such as China, is considerably higher than the minimal increases in 2005 and 2006.

Because of strong global demand, the US mined 1.22 Mt of copper last year, the highest level since 2001, according to the US Geological Survey (USGS). A slight 1% increase in US production is expected in 2007, despite the anticipated decline in domestic copper consumption from slower home building activity.

Deteriorating political conditions and unrest, a relatively weak dollar and concerns over stubborn and growing US trade and budget deficits are all expected to prolong the longest bull market for gold since the metal was first traded on the world market in 1977. At the same time, demand continues to outstrip global gold production, a situation expected to continue with China’s recent decision to legalize gold sales.

US gold production ranked second in the world with Australia and behind South Africa, the world’s largest gold producer. US production in 2007 will again benefit from varied and strong gold demand. According to the World Gold Council, demand in 2006 increased by 40% for investment gold, by 15% for gold used in jewellery and by 46% for industrial use.

As a result, USGS expects US gold production in 2007 to equal and possibly better the 2006 level of 236 t. This output, while only 1.6% above the 2005 level, was the first annual increase in several years.

The complete NMA 2007 Forecast is at www.nma.org/pdf/012907_forecast