Suppliers Feel Pain as Coal Miners Struggle – by John W. Miller (Wall Street Journal – August 30, 2015)

http://www.wsj.com/

Thousands of firms scramble for new customers; ‘it’s been catastrophic’

BROOKVILLE, Pa.—Workers in a rural warehouse here are restoring four machines: a locomotive for coal miner Consol Energy Inc., and three 1947 San Francisco streetcars.

By this time next year, the coal-mining equipment could be gone, and the workers at Brookville Equipment Corp. left repairing just streetcars.

So it goes in coal country, which has been bruised by competition from natural gas, regulation of coal’s heavy carbon footprint, and economic forces like the strong dollar. As big coal miners struggle, their equipment suppliers—thousands of firms sprinkled throughout Pennsylvania, West Virginia, Ohio and Kentucky—are scrambling to find new customers anywhere they can, from gun shops to the San Francisco Municipal Transportation Agency.

For most, nothing will replace the massive scale of the coal-mining sector, and as the generational coal crisis ripples throughout the hamlets and hollows of Appalachia, economists are debating the region’s most viable path for growth.

The plight of big coal is particularly bleak in Central Appalachia, where coal seams are thinner and costs have increased, and where the oil-price collapse has hurt natural-gas drilling and steelmaking. Alpha Natural Resources Inc., one of the nation’s biggest miners, declared bankruptcy on Aug. 3, and other filings are expected.

“A lot of these mines that are closing—particularly the smaller ones—I think are gone for good,” Paul Lang, president of another Appalachian miner, Arch Coal Inc., told analysts in late July.

The modern coal industry is heavily mechanized, and miners depend on a broad web of equipment makers and tool shops. The West Virginia Center on Budget and Policy estimates that four subsidiary jobs depend on every coal-mining job. “Coal mining requires tons of machinery and equipment,” says Ted Boettner, the center’s executive director. “And the problem is that coal companies tend to not be diversified. They’re not also into solar panels.”

Petra Industrial Services Inc. a small Lochgelly, W.Va.-based machine shop, has supplied Alpha, Arch Coal, Murray Energy Corp. and other big miners in the region with machine replacement parts for 30 years. But as many downsize furiously to cope with cheap natural gas, a global coal glut and tougher environmental rules, Petra is trying to adapt.

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