By - Jim Vess

Increase in exports and prices can’t stop a fall in U.S. coal production and mine closures

Energize Weekly, February 6, 2019

Coal production in the U.S. was down nearly 3 percent year-on-year to 755 million short tons in 2018, with mines continuing to close, despite an increase in prices and exports, according to federal Energy Information Administration (EIA) data.

Coal production slipped in three of the five major coal-producing basins as the Rocky Mountain region suffered the biggest annual production decline, 12 percent or 6 million short tons. The Powder River Basin posted a 3 percent production drop, followed by the Northern Appalachian Basin at 2 percent.

The Central Appalachian Basin and Illinois Basin—helped by exports—both posted increases in production. The Central Appalachian Basin was up 4 percent or 3 million short tons compared with 2017, and the Illinois Basin rose 2 percent.

“The bituminous coals produced in Appalachian and Illinois Basins have higher heat content than the subbituminous coal produced in the West,” the EIA said. “Appalachia coals are valued for their coking properties in producing iron and steel both domestically and abroad. The Appalachian regions also benefit from closer proximity to existing coal-exporting infrastructure at Atlantic and Gulf Coast ports.”

As a result of that strong export demand, coal prices for Northern and Central Appalachian steam and metallurgical were up as much as 41 percent. Illinois Basin coal prices were up 19 percent.

Powder River Basin prices were down 2 percent while Rocky Mountain prices were down 3 percent.

The biggest importers of U.S. coal were India, Japan and South Korea in Asia and the Netherlands and Turkey in Europe. Morocco, Croatia and the United Kingdom also increased their imports of U.S. coal.

Still, the 10 million short ton increase in exports to 116 million short tons—15 percent of total U.S. coal production—was not enough to offset declining domestic consumption or stave off mine closures.

The EIA estimated that total U.S. coal consumption was 692 million short tons in 2018, the lowest level in 39 years as nearly 15 gigawatts of coal-fired electricity generation, which is the largest domestic consumer of coal, was closed in 2018.

Since a peak in 2008, production has fallen by a third, and more than half of the nation’s coal mines have closed, dropping from 1,435 mines to 671 in 2017.

In 2018, the largest coal mine in West Virginia, the Pinnacle Mine, in Wyoming County, announced in October that it was closing and Gillette, Wyo.-based Cloud Peak Energy ended 2018 on the verge of bankruptcy.

“As the U.S. market contracted, smaller, less efficient mines were the first to close, and most of the mine closures were in the Appalachian region,” the EIA said.

Between 2008 and 2017, the Appalachian and Illinois basins saw the closure of 340 underground mines and 410 surface mines. Nationally, underground mines represented 60 percent of the closures since 2008.

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