Coal Age Magazine - For more than 100 years, Coal Age has been the magazine that readers can trust for guidance and insight on this important industry.
Issue link: https://coal.epubxp.com/i/629433
The first few pages of this edition of Coal Age sum up the current state of the coal industry. Most of the headlines announce bankruptcies and layoffs as U.S. coal pro- duction continues to fall. The question is not whether it is bad in any coal produc- ing region, but how bad is it? While 2015 started off well, by the end of the year, it seemed that every coal operator was affected by the declining market. Utility coal consumption declined sig- nificantly in 2015. Overall, electrical demand was much lower and coal faced stiff competition from natural gas. Spot prices for eastern U.S. coals have dropped to their lowest levels in at least five years. Prices for oil and natural gas remain at seven-year lows, and a mild winter could spell more problems for energy producers in general and coal operators specifically. From a regulatory standpoint, noth- ing has changed. Despite the fact that the Supreme Court ruled against the Environmental Protection Agency (EPA) on its Mercury and Air Toxic Standards (MATS) in late June, the damage has been done. Undeterred, the Obama admin- istration and the EPA continue to wage war against coal use, rolling out the Clean Power Plan to the industry's dismay. Every January, Coal Age publishes its Annual Forecast based on a survey of its readership. The informal study gives an assessment of the current market situa- tion, as well as the state of mind among coal operators. Based on that information, and data from the leading coal companies, the Energy Information Administration (EIA) and the Edison Electric Institute, Coal Age tries to project market trends. In last year's Annual Forecast, Coal Age thought production had stabilized and predicted U.S. coal production would struggle to remain above 1 billion tons. The market slide that occurred dur- ing 2015 blew that forecast out of the water. According to preliminary figures from the EIA, U.S. coal production totaled 888 million tons during 2015, an 11% decline over 2014 and the lowest lev- el since 1986. Coal production averaged 17 million tons per week in 2015 and with a week or so uncounted for, the final offi- cial production figures will likely be slightly more than 900 million tons. In addition to supply and demand fundamentals, the survey asked coal operators about their feelings, the amount of money they plan to spend this year, and how they intend to spend it. Considering the situation some of them face, especially in southern West Virginia, they feel betrayed. The American coal operator is more pessimistic than ever before. They have money to invest on projects, but they have to justify those projects. 18 www.coalage.com January 2016 f o r e c a s t 2 0 1 6 Coal Miners Search for the Bottom B Y S T E V E F I S C O R , E D I T O R - I N - C H I E F Operators grow more pessimistic as demand for coal declines and prices drop What is the capital expenditure budget for 2016? Less than $10 million 51% $10-$25 million 24% $25-$50 million 5% $50-$100 million 7% More than $100 million 13% For 2016, did capital expenditures: Increase 16% No change 25% Decrease 59% Figure 2 — Capital Expenditures How will the mine spend the money? Figure 1 — Production, Consumption & Attitude