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Early data suggests continued collapse in US coal production in Q1'16

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Six trends shaping the industries and sectors we cover in 2021

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Essential Energy Insights - January 2021


Early data suggests continued collapse in US coal production in Q1'16

Earlycoal production data for the first quarter of 2016 signals a collapse in output from the country'slargest and most active basins, with Northern Appalachian and Powder River basinmines showing the sharpest drops over the same period in 2015.

Providedby the U.S. Mine Safety and Health Administration, the data shows early reportinginformation from U.S. coal producers, reflecting an expected drop in output dueto a host of market and regulatory challengesfacing the industry since 2011.

Duringthe first quarter, a small sample of Northern Appalachian mines that have reportedso far have shown a 45.6% collapse in production, led by cuts at facilities suchas Atlas Acquisition Corp.'sCabin Run mine, which fell from 138,447 tons in the first quarter of 2015 to just80,829 tons in the latest period.

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saw outputslide from 180,189 tons in the year-ago quarter to 41,920 tons in the first quarterof this year at its Hopedale mine.

Whilestill early for the basin's overall production, the data reflects an expected dropin overall production for the U.S. coal region brought on by weakening demand, awarmer-than-expected winter season and an increased number of major producers seekingbankruptcy protection.

Accordingto data from the U.S. Energy Information Administration, estimated U.S. coal production for the week ended March 26— the last full calendar week before the end of the quarter — showed a drop of roughly37.8% to nearly 11.6 million tons, compared to the previous year's 18.6 milliontons.

Thatweekly outlook, based on rail carload estimates, reflects a broader downturn inoutput, including a nearly 50% drop in production from a few mines in the PowderRiver Basin that have reported so far.

Accordingto available MSHA data, the basin was weighed down by sharp declines at its BuckskinMine, owned by Peter Kiewit Sons'Inc., which reported 1.9 million tons in the first quarter, down 56.9%from the year-ago period.

Whilesignificant, the PRB's early output reflects only three active mines.  

Afterfalling 23% in the final quarter of 2015 from the previous year's period, CentralAppalachian mines appear to be easing their output collapse with those mines reportingso far showing a drop of about 9.4% in the first quarter over last year.

Withonly one mine reporting, Arch CoalInc. saw output at its Mountaineer II mine fall from 530,856 tons to426,391 tons in the first quarter. Arch is one of a growing number of coal producersseeking bankruptcy protection. While the company is still in the process of restructuringafter a January filing, it has vowedthat its operations would be unaffected by the bankruptcy process.

Productionfrom those mines reporting in the Illinois Basin slid 29.9% in the first quartercompared to 2015, with output at most of PeabodyEnergy Corp.'s mines showing decreases during the period. Two exceptionscame with the company's Gateway North and Wild Boar mines.

Earlyin the quarter, Peabodyexplored the potential exchange of its 2018 notes for a combination of secured debtobligations and a 10% equity stake in the company, which included both the GatewayNorth and Wild Boar mines.

Accordingto a March 8 EIA forecast, the nation's overall coal production is expected to continueto fall throughout 2016 and could mark the largest percentage decline since 1958.