Some of the last sections to be mined for coal at the Hobet site in Boone County, West Virginia, US. Picture: REUTERS
Some of the last sections to be mined for coal at the Hobet site in Boone County, West Virginia, US. Picture: REUTERS

New York — The clearest sign yet that America’s coal industry headed for widespread job cuts: the amount of coal being produced per US miner is at the lowest level in eight years.

Productivity has slid 11% in 2019 alone. The last time it was this low was in 2011, when coal companies ended up cutting almost half their workers in a downturn that lasted more than four years.

It underscores the intense pressure facing US coal producers. For years, they relied on exports and metallurgical coal used for steel making to offset shriveling demand from US utilities. Now, even those markets are suffering as the global economy slows, liquefied natural gas (LNG) becomes cheap and plentiful in Asia and US President Donald Trump’s trade war churns away.

The bottom line: US production is expected to slide 10% in 2019, and jobs are at risk.

“It’s highly likely there will be more layoffs,” said Phil Smith, a spokesperson for the United Mine Workers of America union. “I don’t think there’s any question.”

The looming downturn comes as Trump, who vowed to rescue the coal industry by easing environmental regulations, begins his re-election campaign. Winning a second term will hinge in part on mining strongholds he carried in 2016, including West Virginia and Pennsylvania.

The White House didn’t immediately respond to a request for comment.

Cutbacks are already underway. On Monday, Peabody Energy said it plans to close an Illinois mine and lay off about 225 workers. Blackhawk Mining idled four West Virginia mines last week and fired about 340 people. And in September, Murray Energy shut mines in West Virginia.

“Most coal-mining companies will have to re-assess production,” said Mike Dudas, an analyst with Vertical Research Partners.

The number of US coal jobs bottomed out at about 48,800 in 2016 as Arch Coal, Peabody and other big miners worked their way through bankruptcy, according to the US bureau of labour statistics. Then, as exports picked up and Trump began his push to roll back environmental regulations, hiring followed suit. The industry added about 4,500 jobs up to and including September.

Second-lowest production rate

Now the market has turned. Lower production means US coal workers will each produce an average of about 12,700 tonnes this year, based on an analysis of production estimates from the US Energy Information Administration (EIA) and employment figures from the bureau of labour statistics. That’s the second-lowest production rate in two decades.

“People are going to have to get laid off,” said Andrew Cosgrove, a mining analyst for Bloomberg Intelligence. “They’re going to have to close mines.”

The moves reflect the confluence of woes pummeling the industry. Electricity producers are shunning the fuel in favour of cheaper natural gas, wind and solar. Global prices for coal shipped to power plants have plunged by more than one-third in the past year in both Europe and Asia.

Metallurgical (coking) coal prices fell last month to the lowest since January 2017, and there’s little sign of a recovery.

“There are few positive catalysts that will lift coking coal prices over the next few months,” Lucas Pipes, an analyst with B Riley FBR, said in a research note Thursday.

Weak demand in South America and Europe, coupled with port restrictions in China, led to an oversupply of steel-making coal, and Pipes reduced his earnings estimates on several US suppliers, including Peabody and Arch.

“People are going to start to hunker down,” said Dudas of Vertical Research. “They won’t ship product into a market that doesn’t need it.”

• Michael R Bloomberg, the founder and majority stakeholder of Bloomberg LP, the parent company of Bloomberg News, has committed $500m to launch Beyond Carbon, a campaign aimed at closing the remaining coal-powered plants in the US by 2030 and slowing the construction of new gas plants.

With Jennifer A  Dlouhy 

Bloomberg