Wednesday, April 26, 2017

A new, detailed look at why coal has declined in the US:

“I actually think the next decade for coal is going to be one of the best decades we’ve ever had.” —Steve Leer, of Arch Coal, as quoted in the Wall Street Journal, February 2011.

Six years ago, the US coal industry was thriving. Coal demand was recovering from the Great Recession, both in the United States and around the world, and it was expanding by more than 5 percent per year. Global coal prices were at record highs, as were the stock prices of the largest coal companies. The market value of the four largest US mining companies—Peabody, Arch, Alpha, and Cloud Peak—reached a combined $33 billion. Emboldened by strong balance sheets and a belief that rapid growth in Chinese coal consumption would continue for decades, these companies doubled down with big investments in new mining assets, both in the United States and around the world, and in new export capacity to ship more US coal abroad.

By the end of 2015, however, Peabody, Arch, and Alpha, along with a number of smaller companies, had all filed for bankruptcy in one of the most spectacular market collapses in history. US coal consumption was down more than 20 percent from 2011 levels. Chinese coal consumption fell in both 2014 and 2015 after decades of rapid growth. Global coal consumption was down as well in 2015. That was only the second time that had happened since the early 1990s, and it was by the largest amount in postwar history. This also occurred just as some of the large investments in new production made when the market was at its peak started coming online. As a result, coal prices around the world ended 2015 between 30 percent and 60 percent lower than they were in 2011.

This downturn hasn’t just impacted coal companies and their shareholders. It has taken a significant toll on the lives of the men and women who work in the coal industry and the communities in which they live. US coal production fell by one-third between 2011 and 2016, but employment has fallen even further. There are now just over 70,000 Americans working in the coal mining industry, down from more than 130,000 at the end of 2011. It was 860,000 at the peak in 1923. Recent bankruptcies threaten the pension and healthcare security of more than 100,000 retired miners and dependents. This drop in coal production has reduced tax revenue in coal communities from West Virginia to Wyoming, resulting in service cuts and teacher layoffs.

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