Coal Seeks Stable 2018, Reasons for Hope, but Challenges Loom
By Taylor Kuykendall
(DEC. 22, 2017) – Political rhetoric around the coal industry may have sounded to some like the promise of a comeback, but many in the sector are simply hoping for a year of stability after markets finally took a turn for the better.
Coal companies, railroads and analysts have suggested 2018 demand could be roughly flat compared to 2017, a year in which coal volumes sprang back off record lows. A relatively warm winter so far could temper early domestic demand, while exports could soften after special circumstances including weather-related events sparked especially strong demand in 2017.
Peabody Energy Corp., the largest U.S. coal mining company, said on its third-quarter earnings call that it was evaluating the weather and other factors to determine its mining plan for the year but was expecting U.S. utility demand to be largely stable, with about 20 million tons of reduced coal demand from plant retirements expected to be largely offset by higher capacity utilization.
With the largest names in the coal space putting bankruptcy reorganizations behind them after a multiyear downcycle in coal markets, balance sheets are cleaner and production cuts have brought the market closer to balance in the wake of a wave of coal retirements. Still, the threat of natural gas displacement and coal-fired retirements looms on the horizon even as companies have been able to lean on recently improved export markets to make up for lost customers at home.