Pandemic hits beleaguered US coal industry hard

The Pennsylvania Complex has the capacity to produce 28.5 million tonnes of coal a year. (Image courtesy of Consol Energy.)

The spreading coronavirus pandemic may too heavy of a burden for the already struggling coal miners in the United States, with three companies announcing operations halts due to measures to contain the spread of the disease.

Australia’s Coronado Global Resources (ASX: CRN) announced on Sunday it had idled its US thermal and metallurgical coal mines due to covid-19-induced global economic downturn.

The company, which operates the Buchanan, Logan and Greenbrier mine complexes in Virginia and West Virginia, will keep its Curragh mine in Australia open.

The operation, which accounts for 65% of Coronado’s output and earnings, will accommodate metallurgical coal export requirements of the miner’s key customers in India and the Asia Pacific, as well as to the Stanwell Power Station, a Queensland government owned entity

At least three major coal miners have halted operations as covid-19 has rapidly expanded across the US, where the death toll could reach 100,000 in the coming weeks

Given the significant stockpile of US inventories and continued production from Curragh, operating cash flows are expected to remain positive, Coronado said.

The miner also noted that its US operations will be maintained for immediate restart when market conditions improve and that shipments to Europe, Brazil and the US itself will continue.

Pennsylvania-based Consol Energy (NYSE: CEIX) said on Monday it is temporarily curtailing production at its Bailey coal mine in Pennsylvania for two weeks after two employees tested positive for the coronavirus.

The miner said it’s keeping its Pennsylvania Complex, including the Enlow Fork and Harvey mines, in operation.

The complex has the capacity to produce 28.5 million tonnes of coal a year, while the halted Bailey mine accounts for 11.5 million annual tonnes of the total capacity.

Alliance Resource Partners (NASDAQ: ARLP) said Monday it would temporarily stop producing coal at all its Illinois basin mines as global measures to combat the virus had crushed demand for energy. In addition, the price war sparked by Saudi Arabia and Russia had lowered oil prices even more, it noted.

Alliance also said it was withdrawing its initial 2020 operating and financial guidance provided in January, which did not reflect the impact of the virus. 

“Although we are suspending formal guidance, we currently anticipate ARLP’s total sales tons for 2020 will be approximately 25% below our initial expectations,” president and chief executive, Joseph Craft, said in the statement.

The operations halt is scheduled to last through April 15, though the coal miner said resuming production could be accelerated or extended, based on the business needs of its customers.

“It is important to note that approximately 75% of our domestic sales are targeted to states that depend on coal, more than any other fuel, to generate electricity,” Craft said.

The announcements come as the pandemic has rapidly expanded across the US, where the death toll could reach 100,000 people in the coming weeks.

Industry decline

Moody’s Investor Services said on Thursday it expected further closures and bankruptcies within the US coal industry as domestic demand for coal was set to drop in the near-term due to the country’s economy shut-down to try reducing the numbers of coronavirus patients.

A slower economic activity is also cutting down US electricity demand, which together with stronger environmental, social and governance concerns could represent “an unprecedented shock” to the coal industry.

From Short-term Energy Outlook. IEA, March 2020.

“Before the intensification of the coronavirus pandemic in the US, we expected that coal production would fall by 15%-20% in the US, to about 550 million st-600 million st,” Moody’s said. “We now expect that the industry conditions will worsen beyond this forecast.”

The volume of coal mined in the US has been declining for the past decade, although burning the fuel still accounts for almost one-quarter of all the country’s electricity generation.

From Short-term Energy Outlook. IEA, March 2020.

Jobs in the sector also continue to shrink. While there are over 129 million people employed by businesses in the US, there are only about 50,000 coal miners, or 0.04% of the country’s total number of people employed by the industry.

The latest jobs report, published in early March, shows that there are fewer people employed by the coal sector now (50,600 as of February) than three years ago (50,900 in January 2017).

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