Following one of its worst years ever, the United States coal industry is expected to continue to decline in 2017, though at a slower pace, says the Institute for Energy Economics and Financial Analysis.
Published earlier this month, the energy and environmental financial research and analysis firm Institute for Energy Economics and Financial Analysis (IEEFA) released its annual outlook for the US coal markets, and as it says, “the picture isn’t pretty.”
Though if you’re not a fan of the US coal sector as a whole, then the picture is definitely looking rosy.
The IEEFA predicts consumption, production, and prices will all slump in 2017, but by a lesser margin than in recent years. The authors of the report explain that “The overall effect will be one of flat performance at best,” though “the US coal industry begins 2017 with better optics than it had a year ago.”
Specifically, the IEEFA outlook predicts coal production will decline by as much as 40 million tonnes. Coal consumption is already down 28% in the US over the past decade, declining to 738 million tonnes in 2015 from 1.02 billion tonnes in 2005. Current estimates for the decline of coal consumption in 2016 range from 26 million tonnes (a 3.5% drop on 2015 numbers) to 57 million tonnes (a 7.7% drop).
The IEEFA sees coal consumption in 2017 set to decline to 675 million tonnes, a drop of as much as 40 million tonnes (or around 6%) from 2016 levels. The long-term estimate sees coal consumption actually rising somewhat through 2020, to around 736 million tonnes per year, before sliding into a “steady, long-term decline through 2050” which will see it drop 464 million tonnes per year.
Coal production itself has declined at a rate of around 42 million tonnes per year from 2006 through 2015, and in 2016 production plummeted by approximately 150 million tonnes — the highest single-year drop in 10 years. Looking forward, the IEEFA predicts two scenarios for 2017: “One will result in flat production. The other sees a decline in production. These two scenarios are shaped by three factors: natural gas prices, coal exports to Europe, and electricity demand in the US.”
What of President Trump? Won’t he be able to reverse this trend?
According to the IEEFA, though the new administration is promising regulatory relief and a resurgence in coal, the IEEFA believes the coal industry is “saddled with a fundamental problem it has failed to address after being riddled with bankruptcies: Too many companies are still mining too much coal for too few customers.”