In conjunction with a collapse in U.S. coal production, coalminer employment has fallenmore than 42% in the first three months of 2016 since production and jobspeaked at the end of 2011.
The drop in production accelerated in the first quarter,compounding the industry's woes.An S&P Global Market Intelligence analysis shows the coal sector reportedjust 173.0 million tons of coal produced in the period. That is down 16.6% fromthe prior quarter and 38.8% lower than peak quarterly production of 282.5million tons.
If the coal sector continues to produce at the rate it didin the first quarter, it would equal 691.8 million tons of coal in 2016. Thatis about 36.8% less than 2011 when the U.S. produced 1.09 billion tons of coal.
The final tally could be even more dramatic than the U.S.Energy Information Administration's recent estimate that annual production would drop to 746million tons, the lowest figure since 1949 when record-keeping began. Many coalcompanies have predicted there will be a continued drop in coal demand in thenear-term as production still needs to come offline to balance prices.
AllianceResource Partners LP noted on a recent call with investors that ithad aggressively slashed at its production as competitors did as well. AlliancePresident and CEO Joseph Craft said he anticipates coal production cuts to "likelyto accelerate throughout the rest of the year as coal markets remainoversupplied."
Alliance does see an opportunity, however, to score newcontracts that were going to other producers in the range of "a couplemillion tons."
"[W]e believe we will have the opportunity to increaseour production next year as there are a couple of contracts that are expiringthat we believe we will be more competitive to secure from those that currentlyhave those contracts," Craft said. "So we do anticipate increasedproduction."
Craft told one analyst that even with national first-quarterrun-rates in the 650 million or so ton range, there is likely at least another20 million-ton coal supply overhang in Northern Appalachia and the IllinoisBasin alone.
"Either supply needs to come off or demand needs to goup from first-quarter levels to eradicate that overhang," Craft said.
The fall in demand and subsequent drop in coal productionhas led to widespread miner layoffs.
S&P Global Market Intelligence's analysis of U.S. MineSafety and Health Administration data shows that average reported quarterlycoal miner employment has fallen from 93,735 miners working in the finalquarter of 2011 to 54,186 in the first quarter of 2016 — a loss of 33,908 jobs.
The rapid decline in coal jobs has become fuel for heatedcoal-country elections. Democratic president nominee Hillary Clinton wasgrilled in places like Appalachia for comments about the effects of reducingcoal use in the U.S. despite offering an economic development assistance plan.Republican nominee Donald Trump won praisefor miners for enthusiastic cheers for the coal industry and promises to bringit back.
"I'd support any assistance to the region,but we're not going to forget who caused these in the first place,"Kentucky Coal Association President Bill Bissett recently S&P Global Market Intelligence.
Compared to just a year-ago, first-quarter coal employmentin Central Appalachiahas fallen 32.6%. The basin's diminishing coal geology and proximity to a boomin natural gas production has made it particularly susceptible ascross-industry competition increases in a reduced-demand environment.
Production in NorthernAppalachia and the IllinoisBasin fell 28.6% and 22.8%, respectively in the first quarter of2016 compared to the same period a year ago.
In contrast, average employment at Powder River Basin minesin the first quarter fell only about 6.2%. However, that figure may catch up toother basins when recent layoff announcementsare factored into second-quarter coal mining and employment data.
Cloud PeakEnergy Inc.President and CEO Colin Marshall said on a recentearnings call that the company is forecasting Powder River Basin coal demand tofall from around 405 million tons in 2015 to just 320 million tons in 2016.While Marshall noted utility coal burn was down about 18% across the nationlast year, the company is anticipating PowderRiver Basin demand will bounce back to 350 million in 2017 ifstockpiles normalize and natural gas prices rise.
"When gas prices rise and coal stockpile start todecrease, there will be room for coal prices to increase to more sustainablelevels too," Marshall said. "How long this will take is unclear, butthe sharp reduction in oil and gas drilling and steep production declines frommany new wells now appears to be starting to reduce US oil and gas production.Hopefully, the reduction will become significant over [the] next few months."
On the same call, Marshall said the of the coal industry have "permanentlychanged" as the industry prepares for more volatility within its shrinkingfootprint.
A wave of layoffs in Wyoming were announced late in the first-quarter and early in thesecond quarter. The full weight of the layoffsat the Alpha Natural ResourcesInc., Peabody EnergyCorp. and Arch CoalInc. mines likely would not show full impact in the currentlyavailable data.
By total average employment, West Virginia has been thehardest hit by coal's decline. The state has lost about 12,199 employees sincethe near-term nationwide coal peak in the last quarter of 2011. That's roughly49.3% of the employees in the region.
Boone County, W.Va. was hit the hardest with a loss of 3,638coal jobs — 78.9% of its coal workforce — in the just over four years.
Kentucky's industry has shrunk the most by percentage,however, losing 61.4% of coal jobs in five years. Kentucky's Pike County alonehas lost about 2,186 coal miners, about 69.1% of the average employees reportedin the county to MSHA at the end of 2011.