Massey Energy Co. is considering options for increasing the production of high-dollar metallurgical coal in hopes of taking advantage of strong demand from the steel industry.

Surging sales of so-called met coal helped the Richmond, Va.-based company increase its profit to $34.9 million in the second quarter, compared with $3.2 million in the same period of 2006. If Massey can sign more sales contracts by September or October, it could boost production at any of several mines in time for April deliveries, Chief Executive Don Blankenship told Wall Street analysts during a conference call yesterday.

“We’ve seen inquiries from the Asian market, which is always a real exciting sign,” Blankenship said. Massey typically sends its metallurgical coal to steelmakers in the United States, South America, Europe and Canada.

For that excitement to continue, Blankenship said, factors such as the 8 percent increase in world steel production during the first half of the year and the U.S. dollar’s weakness against Australia’s currency must remain in place.

“We would probably be looking at volume increases as opposed to switching” coal destined for electric plants to steelmakers, Blankenship said.

“The customers are going to need to come to the table sooner or later,” he added. “That’s not a switch you can throw overnight.”

Strong demand for met coal comes at a good time for producers such as Massey, which have been battling weak prices and sluggish demand for coal at U.S. electric plants.

Massey generated $45.17 in revenue per ton of steam coal sold in the second quarter. Met coal, however, brought $72.16 a ton.

Moreover, Blankenship predicted it would take from 18 months to 21/2 years for the steam coal market to get sorted out.

“We think there’s more pressure to come on price,” he said. On the other hand, Blankenship said Massey could average $75 a ton for met coal.

Massey’s second-quarter performance — earnings per share jumped to 43 cents compared with 4 cents in 2006 — came as a bit of good news for a company that hasn’t had much of that lately.

Massey is accused of thousands of violations of the Clean Water Act, it recently lost a $219.8 million lawsuit — an appeal is planned — and a fatal fire at one of its mines in January 2006 is the subject of an ongoing federal grand jury investigation.

Massey, the nation’s fourth-largest coal company by revenue, operates 19 mining complexes in West Virginia, Kentucky and Virginia. Its stock (MEE: NYSE) rose 82 cents to close at $21.75 yesterday.

source : kentucky.com

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