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Market Forces
More Signs Coal Is Struggling

No matter where they look, American coal producers are struggling to find a market for their product. U.S. coal production tumbled 17 percent in 2016 in large part because demand for the fossil fuel is drying up. As the EIA reports, imports and exports of coal both fell last year:

The United States remained a net exporter of coal in 2016, exporting 60.3 million short tons (MMst) and importing 9.8 MMst. U.S. coal exports fell for the fourth consecutive year, down 13.7 MMst from 2015, with 2016 exports less than half of the record volume of coal exported in 2012 (125.7 MMst). Slow growth in world coal demand combined with supplier competition were the primary factors contributing to the decline in U.S. coal exports.

U.S. coal exports declined through most of 2016 despite mid-year increases in international coal prices. Lower mining costs, cheaper transportation costs, and favorable exchange rates continue to provide a market advantage to other major coal-exporting countries such as Australia, Indonesia, Colombia, Russia, and South Africa.

Coal was once king in the United States, and its dirt-cheap price helped offset its outsized environmental impacts, which included large emissions of greenhouse gases as well as more localized air pollution. But coal’s premier position has come under attack in recent years as the fracking boom has unlocked a flood of cheap, plentiful natural gas. Shale gas is beating coal at its own game by beating it on price, and nearly every metric used to assess the industry—production, consumption, imports, exports, jobs—describes an energy source in decline.

That’s an important fact for the Trump Administration to keep in mind as it crafts its America First energy policy: market forces, not overregulation, are the driving force behind this shift. Coal country is suffering because it simply can’t compete.

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  • Unelected Leader

    Well we know there’s always going to be a coal industry because it’s used to make steel, carbon fiber, and many other things. Ironically, even the filters for air and water filtration often use coal derivatives.
    Wonder how much of this slump is due to natural gas supplanting coal for power vs slow economic growth and reduced demand for steel and glassware?

    • Andrew Allison

      Even better, if/when the seemingly inexhaustible supplies of oil and gas run out, we have a 300-400 year supply of coal.

      • Unelected Leader

        300 to 400 years? Um, excuse me, but Jill Stein and Bernie Sandinista told me that we’ve got maybe 30 to 40 years before earth is a baked potato. Hmm

        • Andrew Allison

          You are extremely fortunate: I am in a position to offer you a terrific deal on a bridge in Brooklyn [/grin] Remember peak oil? The forecasts of the demise of coal are equally nonsensical.

          • rpabate

            Stanley Jevons, a British economist, warned about peak coal in the early days of the Industrial Revolution. He told the British people not to get too comfortable in their new life of rising prosperity, because once the coal ran out they would be back to subsistence living.

        • Andrew Allison

          Malthus made this mistake in 1798. As George Santayana wrote: “Those who cannot remember the past are condemned to repeat it.” The continued belief in socialism confirms Santayana’s opinion.

  • Andrew Allison

    For the past couple of years TAI has been extolling the inventiveness of shale producers in the fact of intense price competition from OPEC. Please explain how coal producers are different.

  • Angel Martin

    In America’s next major war, the more sources of transportation fuels are available, the greater the odds of victory.

    To me that means coal, ethanol, shale, natural gas, conventional oil… and anything else – even if it has to be subsidized.

  • SLEcoman

    Here are few selected quotes indicating that, at least from an international POV, TAI’s analysis may have been too US centric.

    “Australia coal exports reach record level in 2016” (FYI Australia is the world’s second largest coal exporter, after Indonesia). Australia exported 391 million MT (431 million short tons) of coal in 2016

    “Anglo cancels divestments on resurgent coal profits”

    “BHP hits eight-year met [i.e. metallurgical] coal profit high”

    “Coal tops Rio Tinto’s profit table for 2016”

    And maybe the analysis is not real good from a US POV as in December 2016 [latest final US Energy Information Agency (US EIA) data], US coal-fired power generation increased sharply (+32.7% Y/Y) and natural gas-fired power generation was down significantly (-12.2% Y/Y). Coal regained its position as the largest source of US power generation (34.4% market share) while natural gas’s market share declined to 27.9%. These changes were primarily driven by sharply higher (+53% Y/Y) natural gas prices.

    • CaliforniaStark

      Coal use has recently been increasing in the U.S. because of rising natural gas prices; energy users will switch to the cheapest source of power. Energy source generation trends from early 2016 are already outdated — coal looks like it will hold its own in 2017.

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