Though domestic demand for thermal coal has waned over the last few years, overall coal production has remained relatively flat since mid-2016 as exports have helped fill the gap.
About 5.3% of coal produced in the U.S. was shipped to other countries in July 2016, but that increased to 19.1% in April 2018.
"It's a more significant component of the market than it ever has been," said Joe Aldina, director of U.S. coal research for S&P Global Platts. "Those exports are likely to be fairly durable at least over the next couple years."
Coal exports from Central Appalachia and the Illinois Basin in particular soared in 2018 based on port data compiled by S&P Global Market Intelligence. The Norfolk, Va., terminals exported significantly more coking coal and the Port of New Orleans sent more thermal coal to Europe while the Port of Baltimore saw an increase in shipments destined for Asia last year from the year-ago period.
But miners that avoided bankruptcy a few years ago and banked on the thermal coal sector are now struggling while those that reorganized and embraced metallurgical coal are enjoying more cash flow. Cloud Peak Energy Inc., which is contemplating filing for bankruptcy reorganization, and Westmoreland Coal Co., which recently reorganized and formed a new company owned by its creditors, are prime examples of producers that went all in on a business model and have suffered the financial consequences.
"Debt loads are certainly playing a part in the financial woes of these two companies, but they also have very narrow business plans that, as it turns out, are not as sustainable as they thought," said Matt Preston, Wood Mackenzie's research director for North American thermal coal markets.
Though exports and metallurgical coal investments are helping out some companies, the sector as a whole still faces stiff competition from natural gas and renewable energy sources on the thermal side. Peabody Energy Corp. confirmed this week that it laid off about 40 employees from its Kayenta mine in Arizona last month. The mine exclusively serves a power plant that will shutter at the end of the year.
Several legislatures in coal states introduced legislation in their 2019 sessions to help out coal companies, primarily on the thermal side. Despite those efforts, several industry observers said the bills and laws were mostly symbolic gestures that were unlikely to have a major impact on the industry's future.
But there could be some hope yet for U.S. steam coal. A U.S. Department of Energy Official told attendees at a recent industry event that there may be some exciting announcements from the private sector on carbon capture in the coming weeks. In an interview, Lou Hrkman, deputy assistant secretary of clean coal and carbon management, said capturing a ton of carbon costs about $40. The department is working to reduce that price to $30 a ton, which could be accomplished in the next two or three years and might be more attractive to investors.
A Canadian company developing direct air capture technology, which removes and purifies carbon from the atmosphere, also announced $68 million in investment this week that will help build commercial plants that can capture up to 1 million tonnes of carbon dioxide a year, according to a company release.
Mine reclamation: The House Subcommittee on Energy and Mineral Resources will hold a hearing on abandoned mine land reclamation on March 28 in Washington, D.C.
Real Clear Politics: RCP will host a discussion on "Powering the Grid" featuring U.S. Energy Secretary Rick Perry on March 29 in Washington, D.C.
Global Energy Summit: Columbia University's Center on Global Energy Policy will host its 6th annual global energy summit on April 10 in New York City.
National Coal Council: The NCC will hold its spring meeting and 35th anniversary celebration April 11-12 in Washington, D.C.
Society for Mining, Metallurgy & Exploration: The SME will hold its 7th annual Current Trends in Mining Finance Conference April 28-May 1 in New York City.
S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.