Crunch Mining: The Logistics of Western Canadian Export Coal Supply

Abstract

Since its revitalization in 1968 the Western Canadian bituminous coal industry has operated almost exclusively in export markets. As a result, coal sales have been subject to external demand and pricing forces beyond the control of Canadian companies and governments. The recession that affected all industrialized nations in the early 1980s compounded by the world oil price collapse of 1986 initiated a period of low coal prices, intensified competition among producers and oversupply of internationally traded coal. The attritional effects of this adverse marketing regime became serious for Western Canadian metallurgical coal producers after 1989 and reached crisis proportions in 1992. Major coal industry restructuring involving corporate consolidation and substantial write-downs of financial assets quickly followed. Four companies emerged from the restructuring process with 90–95% of potentially reduced regional production capacity and appear to be in reasonably solid positions to compete viably under current marketing conditions. The next major crunch for the industry looms in 1998 when initial 15 year contracts come up for renewal at several mines and serious concerns arise over their ability to operate economically beyond then.