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Released March 14, 2024 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Sowing fear, uncertainty, and doubt (FUD) is a time-tested principle to rally support for or against an initiative, both in the public sector and the private sector. In the U.S., the template was created nearly eight decades ago, shortly after the end of World War II, when leaders in the State Department and the U.S. Senate told President Harry S. Truman that he needed to "make a speech and scare hell out of the country" if he wanted Congress to approve the Truman Doctrine to contain Soviet expansion. He did, and the plan became a cornerstone of U.S. foreign policy.
In the energy world, environmental organizations and Democratic politicians have for years been active purveyors of FUD about what they call the "climate crisis." Republicans and energy interests have gotten better at pushing the FUD button in recent years, focusing on possible loss of jobs and electric reliability that could result from Democratic climate proposals.
Right now, in Colorado, oil and gas producers are using an integrated media campaign to fight a draft legislative bill that could end drilling in the state sometime in the next decade. For more on that bill, see February 16, 2024, article - Energy Wars Return to Colorado. On the other side of the U.S., coal miner CONSOL Energy Incorporated (NYSE:CEIX) (Canonsburg, Pennsylvania) recently got into the FUD game with a campaign showing that widespread blackouts that could happen in the U.S. if the country's use of renewable energy continued rising, as many experts expect.
FUD works because, as behavioral economists have shown, people react more strongly to the threat of loss than they do to the potential for gain. Big Tech, Big Pharma and Big Beverage all have pushed the FUD button whenever laws or regulations are being developed that might cut into their business prospects.
To be credible, FUD must have a foundation of truth, as both the oil and coal campaigns do; but detailed data is less impactful to the general public than scary predictions and the potential for dramatic loss. Electric reliability organizations, such as the North American Electric Reliability Corporation (NERC) (Atlanta, Georgia), have warned about the need to add dispatchable generating resources to backstop intermittent renewable resources such as solar and wind and replace generating units that are retired.
In coal's case, whatever the future may bring, the present is a very good time: Earnings, production and stock price are up significantly for several of America's largest publicly traded coal companies, including CONSOL, Alliance Resource Partners, L.P. (NASDAQ:ARLP) (Tulsa, Oklahoma) and Peabody Energy Incorporated (NYSE:BTU) (St. Louis, Missouri).
Click on the images at right to see bar charts for the earnings levels of some of America's largest publicly traded coal mining companies.
Since early 2021, CONSOL's stock price is up about 720% while Peabody's shares have surged 549% and Alliance's have shot up about 245%. Over that same time period, the Standard & Poor's 500 Index rose about 33%.
The soaring prices of coal company shares followed several brutal years. In 2020, full-year net losses were the rule. But coal companies climbed out of the red in 2021, and skyrocketing stock prices have accompanied an upturn in earnings and production since then.
The reason: years of burgeoning demand in Asia for thermal and metallurgical coal, and expectations that demand will continue rising in the developing economies of China, India, Malaysia and Indonesia.
Though it rues the trend, the International Energy Agency (IEA) (Paris, France) has documented a steady rise in demand for coal in developing nations in Asia. Global demand for thermal coal rose from about 5 million metric tons (MT) in 2002 to approximately 8.5 million MT in 2023, driven by demand in China, India, and the Association of South East Asian Nations (ASEAN). As rapidly as coal demand has fallen in mature economies such as the U.S. and Europe over that two-decade timespan, it has risen faster in those developing nations. The Paris-based energy agency thinks global coal demand has peaked, but only time will tell.
Click on the image at right to see a graphic of global coal demand since 2002, with a projection to 2026.
Industrial Info is not expecting a slowdown in global demand for coal. We are tracking about 2,423 coal projects with a medium- or high-probability of moving forward, according to their respective timelines. These projects, scheduled to begin construction between January 2024 and December 2028, have a total investment value (TIV) of about $122 billion.
The countries with the largest scheduled capital expenditures (Capex) on coal projects over that five-year timeline are China ($79 billion) India ($15.9 billion), Australia ($6.3 billion) and Indonesia $4.8 billion). Fifth-ranking U.S. is home to slightly less than $2 billion of coal projects over the 2024-2028 timeline.
While the U.S. has seen a decline in thermal coal production and domestic use, according to the U.S. Energy Information Administration (EIA), U.S.-based coal companies have thrived in recent years either by exporting U.S. coal or accessing overseas markets via overseas mines in Australia and other countries that are close to demand centers.
"As domestic consumption of U.S. coal declines in the near term, we expect exports to account for a larger share of total U.S. coal consumption, according to our (January 2024) "Short-Term Energy Outlook" (STEO)," the EIA said earlier this year. "We expect U.S. coal consumption will total 482 million short tons in 2024, 29% less than in 2019. We expect that exports will make up 19% of total demand in 2024 and 21% in 2025, up from a share of 14% in 2019 because of decreasing domestic consumption, especially from the electric power sector."
"We simply need more baseload power options to make up for the loss of coal-fired power and insure grid reliability," commented Joseph Govreau, Industrial Info's vice president of research for the Metals & Minerals industry. "The growth of the renewable power has been impressive, but it has its limits. Perhaps nuclear is part of solution? In the meantime, thanks to the fossil fuel industry for keeping the lights on. Let's not demonize an industry that has gotten us this far. It's going to take all hands on deck and pragmatic solutions to make the energy transition."
Prices for all forms of energy, including thermal and met coal, soared after Russia invaded Ukraine in early 2022. But while natural gas and oil soon reverted to their pre-invasion price range, thermal coal prices stayed high as electricity producers valued the energy security of coal. Steelmaking surged in the industrializing nations of the developing world, driving up demand and price for met coal.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
In the energy world, environmental organizations and Democratic politicians have for years been active purveyors of FUD about what they call the "climate crisis." Republicans and energy interests have gotten better at pushing the FUD button in recent years, focusing on possible loss of jobs and electric reliability that could result from Democratic climate proposals.
Right now, in Colorado, oil and gas producers are using an integrated media campaign to fight a draft legislative bill that could end drilling in the state sometime in the next decade. For more on that bill, see February 16, 2024, article - Energy Wars Return to Colorado. On the other side of the U.S., coal miner CONSOL Energy Incorporated (NYSE:CEIX) (Canonsburg, Pennsylvania) recently got into the FUD game with a campaign showing that widespread blackouts that could happen in the U.S. if the country's use of renewable energy continued rising, as many experts expect.
FUD works because, as behavioral economists have shown, people react more strongly to the threat of loss than they do to the potential for gain. Big Tech, Big Pharma and Big Beverage all have pushed the FUD button whenever laws or regulations are being developed that might cut into their business prospects.
To be credible, FUD must have a foundation of truth, as both the oil and coal campaigns do; but detailed data is less impactful to the general public than scary predictions and the potential for dramatic loss. Electric reliability organizations, such as the North American Electric Reliability Corporation (NERC) (Atlanta, Georgia), have warned about the need to add dispatchable generating resources to backstop intermittent renewable resources such as solar and wind and replace generating units that are retired.
In coal's case, whatever the future may bring, the present is a very good time: Earnings, production and stock price are up significantly for several of America's largest publicly traded coal companies, including CONSOL, Alliance Resource Partners, L.P. (NASDAQ:ARLP) (Tulsa, Oklahoma) and Peabody Energy Incorporated (NYSE:BTU) (St. Louis, Missouri).
Since early 2021, CONSOL's stock price is up about 720% while Peabody's shares have surged 549% and Alliance's have shot up about 245%. Over that same time period, the Standard & Poor's 500 Index rose about 33%.
The soaring prices of coal company shares followed several brutal years. In 2020, full-year net losses were the rule. But coal companies climbed out of the red in 2021, and skyrocketing stock prices have accompanied an upturn in earnings and production since then.
The reason: years of burgeoning demand in Asia for thermal and metallurgical coal, and expectations that demand will continue rising in the developing economies of China, India, Malaysia and Indonesia.
Though it rues the trend, the International Energy Agency (IEA) (Paris, France) has documented a steady rise in demand for coal in developing nations in Asia. Global demand for thermal coal rose from about 5 million metric tons (MT) in 2002 to approximately 8.5 million MT in 2023, driven by demand in China, India, and the Association of South East Asian Nations (ASEAN). As rapidly as coal demand has fallen in mature economies such as the U.S. and Europe over that two-decade timespan, it has risen faster in those developing nations. The Paris-based energy agency thinks global coal demand has peaked, but only time will tell.
Industrial Info is not expecting a slowdown in global demand for coal. We are tracking about 2,423 coal projects with a medium- or high-probability of moving forward, according to their respective timelines. These projects, scheduled to begin construction between January 2024 and December 2028, have a total investment value (TIV) of about $122 billion.
The countries with the largest scheduled capital expenditures (Capex) on coal projects over that five-year timeline are China ($79 billion) India ($15.9 billion), Australia ($6.3 billion) and Indonesia $4.8 billion). Fifth-ranking U.S. is home to slightly less than $2 billion of coal projects over the 2024-2028 timeline.
While the U.S. has seen a decline in thermal coal production and domestic use, according to the U.S. Energy Information Administration (EIA), U.S.-based coal companies have thrived in recent years either by exporting U.S. coal or accessing overseas markets via overseas mines in Australia and other countries that are close to demand centers.
"As domestic consumption of U.S. coal declines in the near term, we expect exports to account for a larger share of total U.S. coal consumption, according to our (January 2024) "Short-Term Energy Outlook" (STEO)," the EIA said earlier this year. "We expect U.S. coal consumption will total 482 million short tons in 2024, 29% less than in 2019. We expect that exports will make up 19% of total demand in 2024 and 21% in 2025, up from a share of 14% in 2019 because of decreasing domestic consumption, especially from the electric power sector."
"We simply need more baseload power options to make up for the loss of coal-fired power and insure grid reliability," commented Joseph Govreau, Industrial Info's vice president of research for the Metals & Minerals industry. "The growth of the renewable power has been impressive, but it has its limits. Perhaps nuclear is part of solution? In the meantime, thanks to the fossil fuel industry for keeping the lights on. Let's not demonize an industry that has gotten us this far. It's going to take all hands on deck and pragmatic solutions to make the energy transition."
Prices for all forms of energy, including thermal and met coal, soared after Russia invaded Ukraine in early 2022. But while natural gas and oil soon reverted to their pre-invasion price range, thermal coal prices stayed high as electricity producers valued the energy security of coal. Steelmaking surged in the industrializing nations of the developing world, driving up demand and price for met coal.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
