trending Market Intelligence /marketintelligence/en/news-insights/trending/FxCggjoxV3gMWtHHlXmIzA2 content esgSubNav
In This List

US coal employment, production slide as market poised to get even tougher

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud

Blog

Using ESG Analysis to Support a Sustainable Future

Research

US utility commissioners: Who they are and how they impact regulation

Blog

Q&A: Datacenters: Energy Hogs or Sustainability Helpers?


US coal employment, production slide as market poised to get even tougher

In the second quarter of 2019, average quarterly U.S. coal mining employment declined to the lowest level since the first quarter of Donald Trump's presidency as production in the first half remains significantly lower than the first or second half of 2018.

Average employment in the sector fell by about 2.7% from the first to the second quarter of 2019 while coal production held roughly flat in the same period, S&P Global Market Intelligence analysis of federal data shows. Employment and production figures could look even starker in the next quarter. Blackjewel LLC sent hundreds of miners home and operations were idled in the wake of the company's bankruptcy early in the third quarter while export markets that propped up the industry in recent periods are showing signs of weakness moving forward.

SNL Image

The Trump administration has taken several steps aimed at boosting the coal sector, including rolling back Obama-era efforts to address climate change. Despite the rule changes, many utilities report they are continuing a shift toward cleaner sources of energy. However, that has not stopped the administration from positioning itself as beneficial to coal miners.

"The President is committed to all Americans, including our great hardworking coal miners," White House spokesperson Judd Deere said, according to an Aug. 21 report from NBC News. "It is because of President Trump's economic policies of tax cuts, deregulation — including rolling back the previous administration's harmful and unlawful so-called Clean Power Plan — and energy independence that coal miners are winning."

Seaport Global Securities LLC analyst Mark Levin recently wrote that there are few new metallurgical coal projects in the pipeline worldwide as "producers continue to struggle to offset depletion, particularly because geology is getting more difficult, and a lot of excess cash is being returned to shareholders rather than reinvested in new projects." Domestic thermal coal in the U.S. has long been in decline, but "could be a disaster zone in 2020" based on an expected drop in demand, Levin wrote.

Moody's Investors Service recently changed its outlook on the sector to negative based on weak export prices. The sector's profitability is expected to worsen in the next 12 to 18 months, Benjamin Nelson, a senior credit officer and lead coal analyst with Moody's, wrote in an Aug. 21 note.

"Our long-term outlook for U.S. thermal coal calls for a substantial volume reduction over the next decade driven by utilities switching to natural gas and renewable energy, which still benefits from government subsidies today," Nelson wrote. "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."

SNL Image

Coal production and employment trends vary significantly by location.

Coal employment has been relatively flat in the Northern Appalachia, Central Appalachia and Illinois basins in the past few quarters. Among eastern producers, Central Appalachia bore the brunt of declining production and jobs several years ago. The region since stabilized as producers there focus more on metallurgical coal production where margins are higher and can support the region's generally higher cost structure.

The nation's most productive coal region, the Powder River Basin, produced significantly less coal in the first half of 2019 than in the first or second half of 2018. The area produces thermal coal and has limited access to export markets, making it particularly susceptible to a secular decline in U.S. utility coal consumption.

SNL Image

Unless other coal producers pick up the slack, quarterly coal production could take a significant dip in the third quarter as Blackjewel's Eagle Butte and Belle Ayr mines remain closed since July 1 after initial financing for the company's bankruptcy fell through. The mines accounted for 7.9 million tons of coal production in the second quarter, roughly 11.1% of the 71.4 million tons of coal produced in the period. Contura Energy Inc. is currently negotiating with federal officials to resolve issues with Contura's proposed purchase of the mines, which it sold to Blackjewel in 2017.

Despite a significant amount of production going offline due to the closures, Peabody Energy Corp. President and CEO Glenn Kellow reported that even a month after the Blackjewel mines stopped producing, prices did not change due to ongoing competition from low-priced natural gas and renewables. Peabody and Arch Coal Inc. recently announced they are working toward a joint venture of their operations in the Powder River Basin and Colorado.