Released May 13, 2020 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The outlook for U.S. coal mining companies worsened in the first quarter: Sales volumes of thermal coal to electric generators continued to slide as prices fell, and companies owning coal-fired power plants continued to announce plant closures, precluding future sales opportunities. Financial results for major coal-mining companies reflected deteriorating market conditions, which have been exacerbated by the COVID-19 pandemic.
"Coal-mining companies have been caught at the intersection of declining demand and falling prices, and that recently had been compounded by COVID-19 pandemic," said Joseph Govreau, Industrial Info's Vice President of Research for the Metals & Minerals Industry. "It's hard to see a positive future for the industry, despite efforts by President Donald Trump to support it. Several companies have sought Chapter 11 bankruptcy protection, and others only recently have emerged from it."
Overall U.S. coal production has declined about 42% over the last 12 months, to about 8.2 million tons for the week ended May 2, 2020, from about 14.1 million tons for the week ended May 11, 2019, according to the U.S. Energy Information Administration (EIA) (Washington, D.C.).
Click on the image at right to see weekly U.S. coal production for the last 12 months.
Over the last 18 months or so, prices for Central Appalachian coal have fallen to about $55 per short ton from about $84 per short ton at the start of 2019, a 35% decline, according to EIA data. Northern Appalachian coal has fallen about 36%, to a recent price of $42 per short ton from about $66 per short ton at the start of 2019, the agency said. Coal mined from the Illinois, Unita and Powder River basins has experienced steadier prices.
The Powder River Basin is the largest single source of coal, accounting for more than 40% of U.S. coal. Mines in that basin have laid off about 500 miners during March and April, in response to a slowdown brought about by the COVID-19 pandemic, according to reports in the Casper Star Tribune.
U.S. coal-fired electricity has fallen to a 42-year low, the EIA said in another report. Output from the U.S. coal-fired generating fleet dropped to 966,000 gigawatt-hours (GWh) in 2019, the lowest level since 1976. The decline in last year's coal-generation levels was the largest percentage decline in history (16%) and second-largest in absolute terms (240,000 GWh), the EIA said May 11 in a "Today in Energy" post.
Coal has been losing market share to natural gas and renewables for years, although lower electric demand in 2019 also played a role in coal's declining share of electric generation. U.S. coal-fired generating capacity peaked at 318 gigawatts (GW) in 2011 and has been declining since then, the EIA said in its April Monthly Energy Review, because many plants retired or switched to other fuels and few new coal-fired plants were brought online. By the end of 2019, U.S. coal-generating capacity totaled 229 GW, a decline of roughly 28%.
Click on the image at right to see a chart of the market shares held by different fuels for electric generation.
The industry's negative outlook turned even darker when Great River Energy (Maple Grove, Minnesota), a generation and transmission cooperative, said on May 7 it would retire its 1,151-megawatt (MW) plant, the Coal Creek Power Station, in the second half of 2022 and replace the lost generation with renewable energy. The Coal Creek station began operating in 1979.
Previously, Great River retired its Stanton Station plant in 2017 and exited its half of a coal contract tied to a Wisconsin power plant in 2015.
Separately, in its first-quarter earnings release issued May 6, NiSource (NYSE:NI) (Merrillville, Indiana) reiterated plans to retire nearly 80% of its remaining coal-fired generation by 2023, and exit coal-fired generation completely five years later. Replacing coal-fired generation with cleaner resources is expected to reduce its greenhouse gas emissions 90% by 2030, saving customers more than $4 billion over 30 years. One of those coal-fired plants NiSource expects to retire in 2023 is the R.M. Schahfer Generating Station, a 2,202-MW plant that began operating in 1976.
For more on other coal-fired power plant retirements, see March 17, 2020, article - Coal Use by U.S. Power Generators Continues to Decline and October 30, 2019, article - Coal Power and Coal Mining Trapped in Vicious Cycle.
The realities of a shrinking market for thermal coal were evident in the first-quarter financial results for coal-mining companies. The COVID-19 pandemic made a difficult quarter worse, as several mines had to close temporarily or slow production in an effort to limit the virus' impact on employees. For more on how COVID-19 pandemic has affected industrial activity in several sectors, including Metals & Minerals, see May 11, 2010, article - Three U.S. States with Biggest Surge in Jobless Claims Have $32 Billion in COVID-Affected Projects.
First-quarter revenue declined 32% for Peabody Energy Corporation (NYSE:BTU) (St. Louis, Missouri), to $846 million from $1.25 billion in the first quarter of 2019, the company reported April 29. Coal sales in the just-completed quarter fell about 10% to roughly 36 million tons, compared with 40.1 million for the year-earlier quarter. For the quarter, the company reported a net loss of $130 million, compared with net earnings of $124 million for the first quarter of 2019.
Crosstown rival Arch Resources Incorporated (NYSE:ARCH) (St. Louis, Missouri), formerly known as Arch Coal Incorporated, reported a first-quarter net profit of $25.3 million, down sharply from year-earlier quarter when it earned $72.7 million. Revenue slid 27% to $405 million from $555 million in the year-earlier quarter. Arch's results were cushioned by its sales of metallurgical coal, which is used to manufacture steel. Met coal fetches a far higher price than thermal coal, which is used to generate electricity. Peabody also mines met coal, but its production is less than Arch's.
Peabody and Arch went through Chapter 11 bankruptcy proceedings in 2016. Two other large coal-mining companies, Cloud Peak Energy (Gillette, Wyoming) and privately held Murray Energy Corporation (Clairsville, Ohio), filed for Chapter 11 protection last year.
Other large coal mining companies, including Alliance Resource Partners LP's (NASDAQ:ARLP), also reported steep losses for the just-completed quarter. Alliance reported a net loss of $145 million on $351 million of revenues for the 2020 first quarter. By contrast, the company earned $284 million on $527 million of revenue for 2019's first quarter. Both periods had significant non-recurring items. The company's coal volumes sold slid about 29% in the just-completed period to 7.3 million tons, compared with 10.3 million tons in first-quarter 2019.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 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.
"Coal-mining companies have been caught at the intersection of declining demand and falling prices, and that recently had been compounded by COVID-19 pandemic," said Joseph Govreau, Industrial Info's Vice President of Research for the Metals & Minerals Industry. "It's hard to see a positive future for the industry, despite efforts by President Donald Trump to support it. Several companies have sought Chapter 11 bankruptcy protection, and others only recently have emerged from it."
Overall U.S. coal production has declined about 42% over the last 12 months, to about 8.2 million tons for the week ended May 2, 2020, from about 14.1 million tons for the week ended May 11, 2019, according to the U.S. Energy Information Administration (EIA) (Washington, D.C.).
Click on the image at right to see weekly U.S. coal production for the last 12 months.Over the last 18 months or so, prices for Central Appalachian coal have fallen to about $55 per short ton from about $84 per short ton at the start of 2019, a 35% decline, according to EIA data. Northern Appalachian coal has fallen about 36%, to a recent price of $42 per short ton from about $66 per short ton at the start of 2019, the agency said. Coal mined from the Illinois, Unita and Powder River basins has experienced steadier prices.
The Powder River Basin is the largest single source of coal, accounting for more than 40% of U.S. coal. Mines in that basin have laid off about 500 miners during March and April, in response to a slowdown brought about by the COVID-19 pandemic, according to reports in the Casper Star Tribune.
U.S. coal-fired electricity has fallen to a 42-year low, the EIA said in another report. Output from the U.S. coal-fired generating fleet dropped to 966,000 gigawatt-hours (GWh) in 2019, the lowest level since 1976. The decline in last year's coal-generation levels was the largest percentage decline in history (16%) and second-largest in absolute terms (240,000 GWh), the EIA said May 11 in a "Today in Energy" post.
Coal has been losing market share to natural gas and renewables for years, although lower electric demand in 2019 also played a role in coal's declining share of electric generation. U.S. coal-fired generating capacity peaked at 318 gigawatts (GW) in 2011 and has been declining since then, the EIA said in its April Monthly Energy Review, because many plants retired or switched to other fuels and few new coal-fired plants were brought online. By the end of 2019, U.S. coal-generating capacity totaled 229 GW, a decline of roughly 28%.
Click on the image at right to see a chart of the market shares held by different fuels for electric generation.The industry's negative outlook turned even darker when Great River Energy (Maple Grove, Minnesota), a generation and transmission cooperative, said on May 7 it would retire its 1,151-megawatt (MW) plant, the Coal Creek Power Station, in the second half of 2022 and replace the lost generation with renewable energy. The Coal Creek station began operating in 1979.
Previously, Great River retired its Stanton Station plant in 2017 and exited its half of a coal contract tied to a Wisconsin power plant in 2015.
Separately, in its first-quarter earnings release issued May 6, NiSource (NYSE:NI) (Merrillville, Indiana) reiterated plans to retire nearly 80% of its remaining coal-fired generation by 2023, and exit coal-fired generation completely five years later. Replacing coal-fired generation with cleaner resources is expected to reduce its greenhouse gas emissions 90% by 2030, saving customers more than $4 billion over 30 years. One of those coal-fired plants NiSource expects to retire in 2023 is the R.M. Schahfer Generating Station, a 2,202-MW plant that began operating in 1976.
For more on other coal-fired power plant retirements, see March 17, 2020, article - Coal Use by U.S. Power Generators Continues to Decline and October 30, 2019, article - Coal Power and Coal Mining Trapped in Vicious Cycle.
The realities of a shrinking market for thermal coal were evident in the first-quarter financial results for coal-mining companies. The COVID-19 pandemic made a difficult quarter worse, as several mines had to close temporarily or slow production in an effort to limit the virus' impact on employees. For more on how COVID-19 pandemic has affected industrial activity in several sectors, including Metals & Minerals, see May 11, 2010, article - Three U.S. States with Biggest Surge in Jobless Claims Have $32 Billion in COVID-Affected Projects.
First-quarter revenue declined 32% for Peabody Energy Corporation (NYSE:BTU) (St. Louis, Missouri), to $846 million from $1.25 billion in the first quarter of 2019, the company reported April 29. Coal sales in the just-completed quarter fell about 10% to roughly 36 million tons, compared with 40.1 million for the year-earlier quarter. For the quarter, the company reported a net loss of $130 million, compared with net earnings of $124 million for the first quarter of 2019.
Crosstown rival Arch Resources Incorporated (NYSE:ARCH) (St. Louis, Missouri), formerly known as Arch Coal Incorporated, reported a first-quarter net profit of $25.3 million, down sharply from year-earlier quarter when it earned $72.7 million. Revenue slid 27% to $405 million from $555 million in the year-earlier quarter. Arch's results were cushioned by its sales of metallurgical coal, which is used to manufacture steel. Met coal fetches a far higher price than thermal coal, which is used to generate electricity. Peabody also mines met coal, but its production is less than Arch's.
Peabody and Arch went through Chapter 11 bankruptcy proceedings in 2016. Two other large coal-mining companies, Cloud Peak Energy (Gillette, Wyoming) and privately held Murray Energy Corporation (Clairsville, Ohio), filed for Chapter 11 protection last year.
Other large coal mining companies, including Alliance Resource Partners LP's (NASDAQ:ARLP), also reported steep losses for the just-completed quarter. Alliance reported a net loss of $145 million on $351 million of revenues for the 2020 first quarter. By contrast, the company earned $284 million on $527 million of revenue for 2019's first quarter. Both periods had significant non-recurring items. The company's coal volumes sold slid about 29% in the just-completed period to 7.3 million tons, compared with 10.3 million tons in first-quarter 2019.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 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.
