“The outlook for the North American coal industry remains negative amid ongoing challenges for both metallurgical and thermal coal, including declining coal consumption and low met coal prices,” Moody’s said in its report Coal industry – North America: Lights go dim on coal.
Moody’s vice-president – senior analyst Anna Zubets-Anderson said further production cuts were “necessary” to bring the market back into balance.
She said spot prices remained weak across all US coal basins due to reduced consumption and low natural gas prices.
“Unless there is a recovery, miners’ profitability will continue to decline as higher-priced contracts roll off.”
The US Energy Information Administration said coal production fell across all basins this year, with the greatest drop coming in Appalachia (12% to 237 short tons), and Moody's projects coal consumption to keep declining as natural gas and renewables grow their share of electricity generation.
"Alongside pricing and consumption pressures, the Environmental Protection Agency's Clean Power Plan will also weigh on the industry as its implementation will direct new investment toward natural gas and renewables, exacerbating the decline in coal as a fuel source in the coming years," Zubets-Anderson said.
The ratings agency says coal's share of the fuel mix will drop toward 30% over the decade, compared with 39% last year, with all US coal basins under the pump, though the Illinois Basin was likely to be the most resilient in the face of the market onslaught.
Moody’s said weak seaborne markets would also continue to weigh on US producers, particularly for metallurgical coal.
The agency does not expect there to be much chance of a recovery over the next 12 months due to slowing Chinese demand and continuing weak global steel production.
