Markets

Mild winter weather in the United States during the 2011-12 season and historically low natural gas prices resulted in a decline in steam coal demand and increased steam coal inventories. We believe utilities were still working to decrease their coal stockpiles during 2013, which extended the weakness in the steam coal markets during 2013 even though natural gas prices rose from their previous historic lows. However, we believe that steam coal will remain a large part of electricity generation in the United States and the outlook for exporting steam coal to non-U.S. countries, particularly China and India, appears promising.  In addition, recent economic weakness in Europe and Asian markets has caused a reduction in world-wide steel production, which has affected the demand and price for metallurgical coal that is used in the steel making process. However, we believe the long-term demand for metallurgical coal remains favorable and will eventually lead to higher prices as expected growth in Asian markets, particularly China, creates global demand for steel consumption used in construction.