CA-Black-Transp

The New Norm


Throughout the news section of this edition of Coal Age, readers will note a couple of positive stories among a volley of sad announcements that shook the coal business in early June. Four U.S. coal operators (Murray Energy, Peabody Energy, Alpha Natural Resources and Rhino Energy) announced that nearly 2,700 jobs would be eliminated. These choices are never easily made. With lives that range from 10 to 20 years, the decision to idle or close an operation is almost as difficult as justifying the investment to open a mine.

The announcements were mostly Worker Adjustment and Retraining Notification (WARN) Act notices, which means the job losses are likely. Many of them will occur in Appalachia. Past studies have linked five or more supporting jobs for every mining job. So, in a part of America that desperately needs the income, more than 13,400 jobs could soon disappear.

In the Marketwatch column, an article provided by SNL Energy describes how the Environmental Protection Agency’s (EPA) new Mercury and Air Toxics Standards (MATS) will reduce coal consumption by at least another 5% between now and 2022. The other takeaways from that article are even more telling. First, the CEO of American Electric Power, the largest coal-fired utility, acknowledged and thanked U.S. coal miners for their service and their contribution to building the most reliable electrical network. During the next seven years, the coal business will relinquish more capacity to natural gas. The article concludes with more ominous news related to future EPA regulations.

Another noticeable statistic on the opening news spread is the Top 10 coal production chart, which indicates that total U.S. coal production is tracking 8% lower than the same point in 2014. As U.S. coal operators come to grips with a new norm, which is probably somewhere below the 1-billion-ton-per-year threshold, the industry shouldn’t lose sight of the fact that it will collectively mine more than 950 million tons of coal. That’s a substantial business.

The coal industry has experienced a role reversal of sorts recently. The economy continues to limp along and weaker levels of power production have reduced the demand for coal and prices for prompt delivery. For now, the coal operators with long-term contracts and economies of scale (the lowest cost per ton) will be the most successful. The big question is whether the industry is advancing past the trough or deeper into it. Time will tell. When the coal business rebounds, it will be a leaner, smarter and more nimble set of world class mines.

Steve Fiscor, Coal Age Editor-in-Chief
[email protected]