Despite the administration's efforts to help the U.S. coal sector, average quarterly coal mining employment dropped to its lowest level since the first quarter of Donald Trump's presidency during the recent quarter, according to an analysis of federal mining data this week.
Market factors may only worsen for coal producers and miners going forward.
Several coal companies filed for bankruptcy protection within the last few months and international coal prices have declined, potentially limiting export opportunities later in the year or into 2020.
"We expect a combination of significant retirement of coal-fired power plants in 2018, combined with a now-weakened export market, will bring more tons back into the domestic market and could drive prices lower, especially if natural gas prices remain very low and coal producers attempt to maintain production near current levels," wrote Benjamin Nelson, a senior credit officer and lead coal analyst with Moody's.
Despite several negative factors already affecting producers or that may be on the horizon, there does not yet seem to be a substantial reduction in coal production in the U.S. Several Illinois Basin producers reported that they are starting to feel the impact of the lower international pricing environment, though the basin's second-quarter production among top producers was about flat year over year.
If seaborne thermal coal prices remain low over the coming months, competition for domestic market share is likely to heighten with more coal being directed to U.S. utilities rather than abroad.
Coal production in Colorado is expected to continue to decline, despite a brief uptick in 2017. Experts told S&P Global Market Intelligence that output levels in the state going forward will depend largely on export opportunities, given its reduced utility demand. Colorado coal miners may take an especially large hit in 2025 when several power plants close down coal-fired units.
"There's going to be a wave of retirements of the domestic Colorado coal-fired power plants in the next 10 years with only a handful left," said Gregory Marmon, a Wood Mackenzie senior research analyst.
Climate change and the resulting weather impacts have also proven to be detrimental to the coal sector, according to an S&P Global Market Intelligence analysis this week. While it is difficult to link a weather event to climate change, scientists say the planet's rising temperatures increase the likelihood of severe weather, some of which has already affected coal producers. Heavy rainfall this spring resulted in flooding that plagued Illinois Basin producers seeking to ship their coal down the high and swift-moving water on the Mississippi River.
Although mining companies have thought about their emissions and climate change, few are contemplating the impact climate change can have on their business, said Lukas Rüttinger, a senior project manager with adelphi.
Despite broader concern about climate change, many are still finding ways to invest in coal-related projects. An S&P Global Market Intelligence analysis found that the 20 insurers with the most coal exposure in 2018 invested more so with utilities that generated more than 30% of their power from the fuel in 2017 than with coal miners. All told, those companies held $40.30 billion in coal-fired utilities or producers in 2018.
"We have seen natural gas increase as a primary source of power generation within our investments, and as renewable sources of power generation have grown over the past several years, we too continue to expand our portfolio of investments to include hydroelectric, geothermal, wind and solar," said a John Hancock Life Insurance Co. USA spokesperson.
There were several coal-related actions taken by the courts this week as well. A federal bankruptcy judge approved a proposal to allow Contura Energy Inc. to purchase Blackjewel LLC's Pax metallurgical coal mines in West Virginia separately from the two Powder River Basin thermal coal mines until negotiations with the federal government over the latter are resolved.
A federal magistrate judge in West Virginia also recommended granting a former Massey Energy executive's motion to vacate, set aside or correct his conviction on conspiracy counts related to a deadly explosion of the Upper Big Branch coal mine. Former Massey Energy CEO Don Blankenship served a one-year prison term after being convicted of a misdemeanor conspiracy charge of mine safety violations related to the explosion. Magistrate Judge Omar Aboulhosn concluded that U.S. prosecutors' admitted errors made during the case warrant setting Blankenship's conviction aside.
Upcoming events
National Coal Transportation Association:
National Coal Council:
Southern States Energy Board:
North American Export Coal and Gas Summit
