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This excerpt taken from the ACI 10-K filed Mar 1, 2010. Sales,
Marketing and Trading
Overview. Coal prices are influenced by a
number of factors and vary materially by region. As a result of
these regional characteristics, prices of coal by product type
within a given major coal producing region tend to be relatively
consistent with each other. The price of coal within a region is
influenced by market conditions, coal quality, transportation
costs involved in moving coal from the mine to the point of use,
mine operating costs and the costs and availability of
alternative fuels, such as nuclear energy, natural gas and
hydropower. For example, higher carbon and lower ash content
generally result in higher prices, and higher sulfur and higher
ash content generally result in lower prices within a given
geographic region.
The cost of coal at the mine is also influenced by geologic
characteristics such as seam thickness, overburden ratios and
depth of underground reserves. It is generally cheaper to mine
coal seams that are thick and located close to the surface than
to mine thin underground seams. Within a particular geographic
region, underground mining, which is the primary mining method
we use in the Western Bituminous region and for certain of our
Central Appalachia mines, is generally more expensive than
surface mining, which is the mining method we use in the Powder
River Basin, and for certain of our Central Appalachia mines and
a Western Bituminous mine. This is the case because of the
higher capital costs, including costs for construction of
extensive ventilation systems, and higher per unit labor costs
due to lower productivity associated with underground mining.
Our sales, marketing and trading function is principally based
in St. Louis, Missouri and consists of sales and trading
personnel, transportation and distribution personnel, quality
control personnel and contract administration personnel. In
addition to selling coal produced in our mining complexes, from
time to time we purchase and sell coal mined by others, some of
which we blend with coal produced from our mines. We focus on
meeting the needs and specifications of our customers rather
than just selling our coal production.
Customers. In 2009, we sold coal to domestic
customers located in 39 different states. The majority of those
customers operate power plants, steel mills and industrial
facilities located throughout the United States. The locations
of our mines enable us to ship coal to most of the major
coal-fueled power plants in the United States. For the year
ended December 31, 2009, we derived approximately 23% of
our total coal revenues from sales to our three largest
customers — Tennessee Valley Authority, Ameren
Corporation and Pacificorp — and approximately 48% of
our total coal revenues from sales to our 10 largest customers.
During 2009, we also exported coal to customers located
throughout countries in North America, Europe, South America,
and Asia. Coal sales revenue from foreign customers approximated
$194.4 million for 2009, $486.1 million for 2008 and
$196.7 million for 2007. We do not have foreign currency
exposure for our international sales as all sales are
denominated and settled in U.S. dollars.
Beginning in the third quarter of 2008, worldwide steel prices
plummeted and steel production on a global basis was
significantly curtailed. In particular, steel demand collapsed
in the United States, Western Europe and Eastern Europe. These
are the principal geographic regions where our metallurgical
products are sold. As a result, we produced a smaller percentage
of metallurgical quality coal during 2009 than we did in 2008.
We sold approximately 2.1 million tons of metallurgical
quality coal in 2009, 4.4 million tons of metallurgical
quality coal in 2008 and approximately 2.1 million tons of
metallurgical quality coal in 2007.
These excerpts taken from the ACI 10-K filed Feb 27, 2009. Sales,
Marketing and Trading
Overview. Coal prices are influenced by a
number of factors and vary materially by region. As a result of
these regional characteristics, prices of coal by product type
within a given major coal producing region tend to be relatively
consistent with each other. The price of coal within a region is
influenced by market conditions, coal quality, transportation
costs involved in moving coal from the mine to the point of use,
mine operating costs and the costs and availability of
alternative fuels, such as nuclear energy, natural gas,
hydropower and
Table of Contents
petroleum. For example, higher carbon and lower ash content
generally result in higher prices, and higher sulfur and higher
ash content generally result in lower prices within a given
geographic region.
The cost of coal at the mine is also influenced by geologic
characteristics such as seam thickness, overburden ratios and
depth of underground reserves. It is generally cheaper to mine
coal seams that are thick and located close to the surface than
to mine thin underground seams. Within a particular geographic
region, underground mining, which is the mining method we use in
the Western Bituminous region and for certain of our Central
Appalachia mines, is generally more expensive than surface
mining, which is the mining method we use in the Powder River
Basin and for certain of our Central Appalachia mines. This is
the case because of the higher capital costs, including costs
for construction of extensive ventilation systems, and higher
per unit labor costs due to lower productivity associated with
underground mining.
Our sales, marketing and trading force is principally based in
St. Louis, Missouri and consists of sales and trading
personnel, transportation and distribution personnel, quality
control personnel and contract administration personnel. In
addition to selling coal produced in our mining complexes, from
time to time, we purchase and sell coal mined by others, some of
which we blend with coal produced from our mines. We focus on
meeting the needs and specifications of our customers rather
than just selling our coal production.
Customers. In 2008, we sold coal to domestic
customers located in 35 different states. The majority of those
customers operate power plants, steel mills and industrial
facilities located throughout the United States. The locations
of our mines enable us to ship coal to most of the major
coal-fueled power plants in the United States. For the year
ended December 31, 2008, we derived approximately 24% of
our total coal revenues from sales to our three largest
customers, Tennessee Valley Authority, Ameren Corporation and
TUCO, Inc., and approximately 48% of our total coal revenues
from sales to our ten largest customers. During 2008, we also
exported coal to customers located in 21 countries in North
America, Europe, South America, Africa and Asia. Coal sales
revenue from foreign customers approximated $486.1 million
for 2008, $196.7 million for 2007 and $162.5 million
for 2006. We seek to reduce our exposure to foreign currency
fluctuations by settling all of our coal sales in
U.S. dollars.
Worldwide steel prices increased significantly during the first
half of 2008 due, in part, to shortages of raw materials,
production control particularly in China in advance of the
Beijing Olympics and spreading inflation in many parts of the
globe. As the price of steel increased during the first six
months of 2008, so too did the demand for metallurgical coal. We
produced a higher percentage of metallurgical quality coal
during 2008 than we did in 2007 or 2006 to take advantage of
these favorable price trends. We sold approximately
4.4 million tons of metallurgical quality coal in 2008,
approximately 2.1 million tons of metallurgical quality
coal in 2007 and approximately 2.0 million tons of
metallurgical quality coal in 2006.
Sales, Marketing and Trading Overview. Coal prices are influenced by a number of factors and vary materially by region. As a result of these regional characteristics, prices of coal by product type within a given major coal producing region tend to be relatively consistent with each other. The price of coal within a region is influenced by market conditions, coal quality, transportation costs involved in moving coal from the mine to the point of use, mine operating costs and the costs and availability of alternative fuels, such as nuclear energy, natural gas, hydropower and
Table of Contentspetroleum. For example, higher carbon and lower ash content generally result in higher prices, and higher sulfur and higher ash content generally result in lower prices within a given geographic region. The cost of coal at the mine is also influenced by geologic characteristics such as seam thickness, overburden ratios and depth of underground reserves. It is generally cheaper to mine coal seams that are thick and located close to the surface than to mine thin underground seams. Within a particular geographic region, underground mining, which is the mining method we use in the Western Bituminous region and for certain of our Central Appalachia mines, is generally more expensive than surface mining, which is the mining method we use in the Powder River Basin and for certain of our Central Appalachia mines. This is the case because of the higher capital costs, including costs for construction of extensive ventilation systems, and higher per unit labor costs due to lower productivity associated with underground mining. Our sales, marketing and trading force is principally based in St. Louis, Missouri and consists of sales and trading personnel, transportation and distribution personnel, quality control personnel and contract administration personnel. In addition to selling coal produced in our mining complexes, from time to time, we purchase and sell coal mined by others, some of which we blend with coal produced from our mines. We focus on meeting the needs and specifications of our customers rather than just selling our coal production. Customers. In 2008, we sold coal to domestic customers located in 35 different states. The majority of those customers operate power plants, steel mills and industrial facilities located throughout the United States. The locations of our mines enable us to ship coal to most of the major coal-fueled power plants in the United States. For the year ended December 31, 2008, we derived approximately 24% of our total coal revenues from sales to our three largest customers, Tennessee Valley Authority, Ameren Corporation and TUCO, Inc., and approximately 48% of our total coal revenues from sales to our ten largest customers. During 2008, we also exported coal to customers located in 21 countries in North America, Europe, South America, Africa and Asia. Coal sales revenue from foreign customers approximated $486.1 million for 2008, $196.7 million for 2007 and $162.5 million for 2006. We seek to reduce our exposure to foreign currency fluctuations by settling all of our coal sales in U.S. dollars. Worldwide steel prices increased significantly during the first half of 2008 due, in part, to shortages of raw materials, production control particularly in China in advance of the Beijing Olympics and spreading inflation in many parts of the globe. As the price of steel increased during the first six months of 2008, so too did the demand for metallurgical coal. We produced a higher percentage of metallurgical quality coal during 2008 than we did in 2007 or 2006 to take advantage of these favorable price trends. We sold approximately 4.4 million tons of metallurgical quality coal in 2008, approximately 2.1 million tons of metallurgical quality coal in 2007 and approximately 2.0 million tons of metallurgical quality coal in 2006. | EXCERPTS ON THIS PAGE:
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