US coal sector sees record lows in 2020, price recoveries

Houston — The US coal industry saw a challenging year in 2020, due to the coronavirus pandemic, cheap natural gas prices and a rise in renewable generation, but coal prices have recovered in the second half of the year.

Lockdown restrictions in the beginning of the coronavirus pandemic and work-from-home orders resulted in lower power generation. For a four-month stretch between February and May, US power generation from coal was the lowest month on record, according to US Energy Information Administration data that goes back to 1973.

Total US power generation across all sectors is expected to be at 4,000 TWh in 2020, which would be down 3.1% year on year and the second-lowest figure in the last 17 years, only higher than 3,951 TWh generated in 2009.

Coal is estimated to make up 20% of US power generation in 2020, down from 24.2% in 2019 and the lowest in over 70 years, according to EIA data. Natural gas' share is expected at a record-high 39.3%, up from 37.3% in 2019, as spot Henry Hub gas prices are forecast to average a 22-year low $2.15/MMBtu in 2020. Renewables, including hydro, are estimated at a 58-year high 19.6%, up from a 17.5% generation share in 2019.

Utilities canceled and deferred coal shipments in Q2, due to weaker demand. Coal deliveries recovered in the third quarter to 115.7 million st, up 26% on the quarter, according to EIA data. However, deliveries through the first three quarters of 2020 were down 23.5% year on year at 321.89 million st.

In line with the weaker demand, coal producers cut back on production during the year. The US is expected to produce 521.5 million st of coal in 2020, according to the EIA, which would be down 26.2% year on year and the lowest since 504.18 million st was produced in 1964.

Despite the lower production, utility stockpiles remain higher on a days-of-burn basis, as bituminous stocks were at 116 days cover at the end of September, while subbituminous stocks were at 91 days, up 16% and 32.9% year over year, respectively, according to the latest EIA data. Stocks for both types of coal were the highest in over 12 years for the corresponding month, according to the EIA.

Bankruptcies, power plant retirements continue

US coal power plant retirements continued in 2020, but the pace slowed from the previous two years.

Roughly 9,411 MW of coal-fired summer capacity is expected to be retired in 2020, with 6,305 MW already retired through September, according to EIA data. However, the 9,411 MW would be down from the 12,907 MW retired in 2018 and 12,530 MW retired in 2019. Just 2,724 MW of capacity is estimated to be retired in 2021, which would be the lowest figure in a year since 1,485 MW in 2010.

The plants that are expected to be retired in 2020 took delivery of 27.11 million st of coal in 2019, or roughly 4.9% of the total US deliveries. Wyoming and Montana coal mines, which is primarily made up of production from the Powder River Basin, delivered 62%, or 16.72 million st, of the coal in 2019.

Bankruptcies also continued in 2020 but declined from year-ago levels.

Through Dec. 18, six coal companies filed for bankruptcy in 2020, down from seven companies in 2019, according to S&P Global Market Intelligence data that includes public companies or private companies with public debt with assets or liabilities over $2 million.

Foresight Energy was the largest company to file for bankruptcy in 2020 with assets and liabilities over $1 billion at its initial filing. Hopedale Mining, White Stallion Energy and Lighthouse Resources all had assets and liabilities between $100 million and $500 million.

In 2019, Murray Energy and Blackhawk Mining each had assets and liabilities greater than $1 billion, while Blackjewel, Trinity Coal, Cloud Peak Energy and Piney Woods Resources each had liabilities between $100 million and $500 million.

Since 2014, 39 coal companies have filed for bankruptcy, which represents 1.1% of all US bankruptcies in that span.

Coal prices recover from summer lows

US thermal coal prices hit multiyear lows in the summer but have partly recovered since the coronavirus pandemic started.

Prompt-month Central Appalachia rail (CSX) coal prices tumbled to a record-low $32.25/st on June 24, down nearly $14 from January highs, according to S&P Global Platts. However, CSX coal has risen by $18.65 to a 16-month high $50.90/st, as of Dec. 17, its highest level since $51.50/st on Aug. 13, 2019.

In July and August, Powder River Basin coal fell to $11.70/st, the lowest level since November 2017. PRB prices have climbed to $11.90/st, as of Dec. 17, but have yet to reach the January peak of $12.20/st.

Illinois Basin 11,800 Btu/lb barge coal also dropped to a record-low $28.75/st on July 23. Prompt-month IB prices have rallied to $31.50/st, as of Dec. 17, but have yet to reach its 2020 high of $36/st on Jan. 27.