Coal faces domestic headwinds in the US: Wendt

OVER the past decade, the US shale oil and gas boom has flooded the domestic market with cost competitive natural gas, swiping market share away from coal and giving utilities alternatives, according to Mine Life Investment newsletter director Gavin Wendt.
Coal faces domestic headwinds in the US: Wendt Coal faces domestic headwinds in the US: Wendt Coal faces domestic headwinds in the US: Wendt Coal faces domestic headwinds in the US: Wendt Coal faces domestic headwinds in the US: Wendt

Mine Life senior resources analyst Gavin Wendt.

Lou Caruana

The US Energy Information Administration has projected that 2016 U.S. coal production will equal about 752.5 million tons - representing a 25% decline from 2014.

During 2015, U.S. utilities burned almost exactly the same amount of coal as natural gas, with each commodity representing 33% of U.S. electricity generation, according to the EIA.

The EIA projects that coal will still deliver 20% of U.S. electricity by 2040. But as recently as 2008, the US burned more than double as much coal as it did natural gas, illustrating coal's swift decline, according to Wendt.

“The commodity is also facing intense pressure from regulators and the Obama administration, which has erected regulatory obstacles that block coal-fired power plants because of their contribution to climate change,” he said.

“Coal is without doubt becoming less acceptable within the construct of modern Western world economies and this will inevitably impact upon demand – but at the same time thermal coal demand will likely continue to increase over the near-to-medium term, as a result of population growth and corresponding energy demand escalation in emerging economies.

“The key issue however is that life is set to become increasingly more difficult for the companies that actually mine and produce thermal coal, irrespective of the overall demand outlook. This means that investors, for a range of reasons, are most likely going to be less inclined to invest in thermal coal producers.”

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