For the State of American Coal, Check Out West Virginia's Mining
(Bloomberg) -- No place tells the story of America’s coal markets better than West Virginia right now.
According to U.S. government estimates released Thursday, mining in the northern half of the Mountain State -- the part known for its bounty of thermal coal, used to fuel U.S. power plants -- slid 7 percent in the first half of 2018 from year-earlier levels. Meanwhile, output from West Virginia’s southern coalfields -- known for massive reserves of metallurgical coal, the kind used in steelmaking -- was up, by almost the same percentage.
The contrast speaks to the dynamics that have dominated U.S. coal markets for months now. The export market for U.S. coal remains strong, thanks to rising demand from Asia and strong buying from Europe. But that’s been more helpful to metallurgical coal miners since three-quarters of those tons get shipped overseas and just a fraction of thermal coal lands abroad.
Despite the Trump administration’s efforts to bolster thermal coal demand from U.S. power generators, the thermal market has continued to shrink as coal plants get beat out by cheaper natural gas-fired generators and renewable energy sources.
“Exports are the saving grace,” said Andrew Cosgrove of Bloomberg Intelligence. “If you’re a thermal coal producer, you’re not going to get any help from the domestic market.”
Overall, U.S. coal output fell 2.3 percent through June 30 compared with a year ago.
The divergent trends have meant those regions rich in thermal coal (the majority of Coal Country) have suffered while metallurgical-heavy areas are enjoying an uptick. Alabama, one of the largest exporters of metallurgical coal, saw its output rise 6.8 percent. In thermal-coal powerhouse Illinois, output fell 3.2 percent.
Metallurgical coal exports could reach 55 million metric tons in 2018, up from 50 million a year ago, according to Cosgrove. Thermal coal exports, on the other hand, may total 37 million metric tons this year, accounting for about 5 percent of production.
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