US Coal Industry Outlook Dulled by Falling Demand - Zacks
US research agency Zacks said that the importance of coal and the coal industry in US has declined in the United States over the past few years, with natural gas and renewable sources creating more downside pressure. US coal companies are continuously losing ground, as natural gas and renewable energy are being preferred over coal for energy needs. The shift in loyalty is primarily due to concerns about increase in emission and the effects of pollution on human growth and development. Availability of cheap shale gas in the United States, technological advancement and incentives on usage of renewable energy continue to cut down the popularity of coal as a source of energy. The latest report from U.S. Energy Information Administration forecasts 2020 coal consumption in the United States to fall to 531 million short tons, indicating an 11% decline from the 2019 levels of 596 million short tons. Coal consumption is estimated to further drop to 513 million short tons in 2021.
Amid declining domestic consumption, coal exports have been aiding US miners to gain some lost ground. Despite stable coal shipment to India, Japan and South Korea, EIA estimates overall U.S. coal exports to drop by 11% year over year in 2020 to 83 million short tons. Higher usage of cheap natural gas supplied from Russia is expected to lead to the decline in usage of coal in European countries. In addition, rising coal exports from Indonesia and Australia, and proximity to Southeast Asian countries (high coal demand zone) are hurting US shipments.
The Trump administration clearly has a pro-coal stance, with the Environmental Protection Agency coming up with an Affordable Clean Energy proposal to replace the stringent Clean Power Plan. Trump also decided to exit the Paris Climate Agreement to promote usage of coal and revive the industry. Employment in the coal industry remained steady in the last two years. However, the ongoing decline in coal exports and domestic consumption will adversely impact the prospects of coal companies operating in the United States.
Coal companies continue to face hardship and have already seen their share of difficulties, with dropping demand, rising competition from other energy sources and increasing emission awareness over the past few years. At present, higher volumes of coal are produced from mines with minimum human intervention, which can have a negative impact on job growth in the industry. The change in policy by the current US administration is assisting coal-fired plants and creating demand for the commodity but the expected drop in U.S. coal exports is likely to create more challenges for the industry. Amid such difficulties, coal companies are trying to reduce operating costs, idle high cost mines, produce more low cost mines and enter into collaborations to remain competitive.
Source : Strategic Research Institute