Released April 14, 2016 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--While its future is perhaps not as dark as the inside of a shuttered mine at midnight, the U.S. coal mining industry has certainly seen better days. Wednesday's filing for Chapter 11 bankruptcy protection by Peabody Energy Corporation (NYSE:BTU) (St. Louis, Missouri) is just the latest sign of the problems faced by the industry, which has seen a dramatic slump in demand in recent years. Industrial Info is tracking 11 Peabody projects worth $676.86 million.
Glenn Kellow, chief executive officer of the self-proclaimed world's largest private-sector coal company, said in a press statement the filing in U.S. Bankruptcy Court comes amid "unprecedented" factors affecting the global coal industry, including a "dramatic drop in the price of metallurgical coal, weakness in the Chinese economy, overproduction of domestic shale gas and ongoing regulatory challenges."
Peabody, which has mining operations in the U.S. and Australia, is looking at more than $10 billion in liabilities, according to multiple news accounts. The company said Wednesday the planned sale of its New Mexico and Colorado assets fell through after the buyer was unable to complete the transaction. However, Peabody reported it has obtained $800 million in debtor-in-possession financing, subject to court approval. Meanwhile, all of the company's mines and offices are continuing to operate, it said. For the year 2015, the company reported its net loss had ballooned to $2.04 billion from $777 million in 2014. Revenue for 2015 fell by more than $1.1 billion from the previous year.
Peabody reported in February it didn't expect market conditions to get any better this year. It said it expected U.S. utility coal consumption to fall by 40 million to 60 million tons based on projected plant retirements and lower natural gas prices. "The decline in demand, combined with an expected significant reduction in utility stockpiles and lower exports, is projected to result in a 150 to 170 million ton decline in 2016 U.S. coal shipments."
Coal demand by U.S. from electric utilities dropped by about 110 million tons in 2015 due to mild weather and lower natural gas prices, according to the company. Natural gas prices fell nearly 40% percent in 2015, which drove coal's share of electricity generation in the power sector down to 34% compared with 40% percent in 2014. U.S. coal production declined about 105 million tons in 2015. The U.S. Energy Information Administration has forecast that production will decline by an additional 29 million tons in 2016. For more information, see December 17, 2015, article - EIA: U.S. Coal Production Drops 10% in 2015, Consumption by Power Industry to Rise 1% in 2016.
Speaking at an industry conference in March, energy consultant Ted O'Brien, chief executive at Doyle Trading Consultants (DTC) (Grand Junction, Colorado), said over the last 18 months, low-priced gas has displaced an estimated 150 million short tons of coal use among electric utilities. For more information, see March 25, 2016, article - Consultant: Coal's Pain Not Over Yet.
On the global stage, slowing economic growth drove commodity prices lower in 2015, Peabody said in February, resulting in the largest broad commodity market decline since 1991. Seaborne coal prices continued to fall in 2015 as a reduction in Chinese imports more than offset supply cutbacks, and U.S. coal demand was impacted by lower natural gas prices. Seaborne metallurgical coal markets witnessed a 5% drop in domestic Chinese steel demand as a result of the economic slowdown and oversupply, while steel production fell 2%, which in turn resulted in a 20% drop in metallurgical coal imports.
Peabody's financial woes didn't happen overnight. In 2011, Peabody acquired Australia's Macarthur Coal Limited in a deal valued at $5 billion, according to news accounts, as it strove to take advantage of growing steel production in Asia. However, 2011 proved to be a peak year for metallurgical coal prices, which have been on the downslide ever since.
Nor is Peabody the only big coal producer to suffer market-driven pains. In January, Arch Coal Incorporated (NYSE:ACI) (St. Louis) filed for bankruptcy protection as part of a restructuring agreement with lenders that would eliminate more than $4.5 billion in debt from Arch's balance sheet.
Peabody's Kellow noted that multiple third-parties project that both U.S. and global coal demand will stabilize. For the coal industry, the big question is when that stabilization will occur.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
Glenn Kellow, chief executive officer of the self-proclaimed world's largest private-sector coal company, said in a press statement the filing in U.S. Bankruptcy Court comes amid "unprecedented" factors affecting the global coal industry, including a "dramatic drop in the price of metallurgical coal, weakness in the Chinese economy, overproduction of domestic shale gas and ongoing regulatory challenges."
Peabody, which has mining operations in the U.S. and Australia, is looking at more than $10 billion in liabilities, according to multiple news accounts. The company said Wednesday the planned sale of its New Mexico and Colorado assets fell through after the buyer was unable to complete the transaction. However, Peabody reported it has obtained $800 million in debtor-in-possession financing, subject to court approval. Meanwhile, all of the company's mines and offices are continuing to operate, it said. For the year 2015, the company reported its net loss had ballooned to $2.04 billion from $777 million in 2014. Revenue for 2015 fell by more than $1.1 billion from the previous year.
Peabody reported in February it didn't expect market conditions to get any better this year. It said it expected U.S. utility coal consumption to fall by 40 million to 60 million tons based on projected plant retirements and lower natural gas prices. "The decline in demand, combined with an expected significant reduction in utility stockpiles and lower exports, is projected to result in a 150 to 170 million ton decline in 2016 U.S. coal shipments."
Coal demand by U.S. from electric utilities dropped by about 110 million tons in 2015 due to mild weather and lower natural gas prices, according to the company. Natural gas prices fell nearly 40% percent in 2015, which drove coal's share of electricity generation in the power sector down to 34% compared with 40% percent in 2014. U.S. coal production declined about 105 million tons in 2015. The U.S. Energy Information Administration has forecast that production will decline by an additional 29 million tons in 2016. For more information, see December 17, 2015, article - EIA: U.S. Coal Production Drops 10% in 2015, Consumption by Power Industry to Rise 1% in 2016.
Speaking at an industry conference in March, energy consultant Ted O'Brien, chief executive at Doyle Trading Consultants (DTC) (Grand Junction, Colorado), said over the last 18 months, low-priced gas has displaced an estimated 150 million short tons of coal use among electric utilities. For more information, see March 25, 2016, article - Consultant: Coal's Pain Not Over Yet.
On the global stage, slowing economic growth drove commodity prices lower in 2015, Peabody said in February, resulting in the largest broad commodity market decline since 1991. Seaborne coal prices continued to fall in 2015 as a reduction in Chinese imports more than offset supply cutbacks, and U.S. coal demand was impacted by lower natural gas prices. Seaborne metallurgical coal markets witnessed a 5% drop in domestic Chinese steel demand as a result of the economic slowdown and oversupply, while steel production fell 2%, which in turn resulted in a 20% drop in metallurgical coal imports.
Peabody's financial woes didn't happen overnight. In 2011, Peabody acquired Australia's Macarthur Coal Limited in a deal valued at $5 billion, according to news accounts, as it strove to take advantage of growing steel production in Asia. However, 2011 proved to be a peak year for metallurgical coal prices, which have been on the downslide ever since.
Nor is Peabody the only big coal producer to suffer market-driven pains. In January, Arch Coal Incorporated (NYSE:ACI) (St. Louis) filed for bankruptcy protection as part of a restructuring agreement with lenders that would eliminate more than $4.5 billion in debt from Arch's balance sheet.
Peabody's Kellow noted that multiple third-parties project that both U.S. and global coal demand will stabilize. For the coal industry, the big question is when that stabilization will occur.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
