CHARLESTON, W.Va. (AP) - Mining giant Arch Coal completed its acquisition of smaller rival International Coal Group on Wednesday. It's the latest in a string of big deals centered on strong international demand for coal used to make steel.
Buying ICG, based in Scott Depot, W.Va., makes Arch a much bigger player in the metallurgical coal end of the industry, where prices as high as $315 a ton dwarf those of coal sold to electric utilities. Arch said ICG will make it the No. 2 U.S. producer of met coal when it announced its $3.4 billion cash bid in May.
The deal follows Virginia-based Alpha Natural Resources' $7.1 billion takeover of Massey Energy and Walter Energy's $3.2 billion buyout of Western Coal, a Canadian operator of mines in West Virginia, British Columbia and Wales.
Demand from steelmakers for metallurgical coal remains strong, said steel industry analyst Chuck Bradford of Affiliated Research Group. Emerging economies need more steel, and demand for met coal continues in countries such as China, India and Brazil.
In China, steel production is outpacing Bradford's estimates.
"I thought steel would grow more like 7 (percent) this year," Bradford said. "It looks like maybe more like 8" percent.
U.S. metallurgical coal exports to China remain relatively small but increased 250 percent last year, Bradford said.
Arch's acquisition of ICG also spells the end of billionaire investor Wilbur Ross' attempt to build his own coal powerhouse with a string of acquisitions. The strategy never really got off the ground: ICG failed to gain momentum after the deaths of 12 miners in the Jan. 2, 2006, explosion at its Sago Mine in northern West Virginia.
The explosion led to landmark federal and state safety reform laws that required underground mines to install airtight refuges for miners, who like the Sago victims, find themselves unable to escape after a disaster. Mines also now must cache emergency air supplies and, as of Wednesday, have high-tech wireless equipment capable of tracking miners from the moment they go underground and maintaining communications with the surface after explosions, fires and other disasters.
Former President George W. Bush signed the Mine Improvement and New Emergency Response Act on June 15, 2006 and Sen. Sen. Jay Rockefeller credited the legislation with cutting coal mine fatalities 14 percent and injuries 25 percent.
"The MINER Act was a huge step forward. Safety laws save lives and keep families intact," the West Virginia Democrat said in a statement.