Coal news and updates

US coal prices have dropped to their lowest level in six years, as the global energy-price slump has hit a mining industry already battered by weak demand and tightening environmental regulations.

The benchmark price of thermal or steam coal, used for power generation, from the Appalachia region of the eastern US fell to $45.75 per short ton last week, down from more than $56 per ton a year ago.

The price now is not far from the most recent low point of $42.20 per ton, reached during the depths of the last recession in April 2009.

Domestic coal demand has been hit by plunging oil prices and a 44 per cent fall in the price of natural gas since June. Together, they have encouraged power generators in many parts of the US to shift away from burning coal.

Meanwhile exports, which were rising earlier in the decade and were seen as an increasingly important outlet for US coal, have been falling, hit by global oversupply and the strength of the dollar, which has made American mines less competitive internationally.

Matt Preston, an analyst at Wood Mackenzie, said that there was a “worldwide malaise” in coal demand. “China is the biggest single importer, so if China is declining the whole world is going to feel it,” he said. “But all around the world, the industry is challenged.”

The slump in coal prices has hit the share and bond prices for US mining companies. In the past five years, shares in Peabody Energy have lost 87 per cent of their value, Alpha Natural Resources has lost 98 per cent, and Arch Coal 96 per cent.

Mining companies sell most of their coal on multiyear contracts, so they are not immediately affected by the fall in the benchmark, but that price is used as a reference point for annual contract renegotiations, so it will have an effect on future revenues.

Peabody, which is the developed world’s largest coal producer, last week reported an after-tax loss of $787 million (Dh2.89 billion) for 2014 and cut its quarterly dividend 97 per cent to 0.25 cents.

US coal production dropped in 2013 to its lowest level since 1993 and it is expected to drop back to that same level this year after a slight rebound in 2014, according to the country’s Energy Information Administration.

The number of people employed in the industry, which had been rising in the second half of the 2000s, has dropped by 13,400 in the past three years to 76,100 at the end of 2014, its lowest level for nine years.

 

 

Source: Financial Times