Quarterly average U.S. coal mining employment is at the highest level since 2015 despite total coal production declining in the past three quarters, according to an analysis of available second-quarter coal mining data.
Coal jobs were up about 1.5% quarter to quarter in the recent period as production fell about 3.7% at the same mines, according to an analysis of available data from the U.S. Mine Safety and Health Administration. Mines with second-quarter data available included in the S&P Global Market Intelligence analysis accounted for about 97% of the full coal production reported in first-quarter data.
Coal production at mines analyzed totaled 175.9 million tons, down significantly from 182.6 million tons in the prior quarter. The quarterly total was the lowest reported coal production at the same set of mines since a sharp downturn in production in early 2016. Coal production for the entire first half at the mines was about 13.4 million tons lower than the first half of 2017.
At the same time, coal jobs have climbed at those mines in the past two quarters to a quarterly average of 51,251 coal mine employees. That is the highest total quarterly average coal mine employment reported by that collection of coal mines since the last quarter of 2015 and represents an average additional 774 coal mine employees compared to the prior quarter.
Much of the decline in coal production came from the Powder River Basin, where heavy rainfall impacted miners' ability to dig up coal at some of the largest mines in the nation. Coal production at Peabody Energy Corp.'s North Antelope Rochelle mine, for example, declined about 18.8% compared to the prior quarter and was down about 6.0% compared to the same quarter a year ago.
"To put the wet weather in perspective for the [Powder River Basin], year-to-date, [North Antelope Rochelle] has received a record annual rainfall with over 16 inches of rain through the middle of July," Peabody CFO Amy Schwetz said on a July 24 earnings call. "This compares to an average of about 13 inches per year and a previous annual record of 15.7 inches in 2014. And that's still with five and a half months to go in the year."
The Powder River Basin is the most productive coal mining region in the country on a tonnage basis, but other regions generally employ more miners to dig the same volume of coal. Average coal mine employment likely increased because, although Powder River Basin coal production was down significantly, production was up by about 5.7% in Northern Appalachia and 3.6% in Central Appalachia and held relatively flat in the Illinois Basin.
The differences in the eastern basins versus the Powder River Basin were evident among those railroads that have reported for the second quarter. Union Pacific Corp., largely focused in the western U.S., reported that contract changes, power plant retirements and low natural gas prices drove a decline in coal and coke volume moved in the second quarter. Meanwhile, Norfolk Southern Corp., which transports coal primarily on the East Coast, reported that its second-quarter earnings saw increases in coal revenue driven by "sustained, high overseas demand for U.S. coals."
Producers have also been reporting success selling their coal into seaborne markets for thermal and metallurgical coal. Murray Energy Corp., for example, will sell about 22.5 million tons of coal into export markets in 2018, Murray Energy Director, President and CEO Robert Murray recently told S&P Global Market Intelligence.
Murray predicted that the entire market for U.S. thermal coal in 2018 would be about 550 million to 600 million tons, with no fundamental indications suggesting a change in those projections for the next five years.
"There must be more consolidation of thermal coal production in the United States. The principal regions for this are the Northern Appalachian, Illinois and Uinta Basins," said Murray, who has operations in all three regions. He declined to comment on his own company's potential merger and acquisition ambitions. "The Central Appalachian Basin has already been decimated, and the Powder River Basin will see a huge decline."