Coal sector woes expected to accelerate, experts say

With coal prices sitting at multi-year lows, almost 17% of coal production this year in the United States could be at risk of idling or closure, as total cash costs plus sustaining capital expenditures exceed current market prices, Wood Mackenzie says in a new coal market outlook.

The majority of the coal at risk in the U.S. is produced in central Appalachia, where about 72% of total output is unprofitable, estimates the intelligence firm, which specializes in energy, metals and mining.

Declining productivity, thinning seams, rising strip ratios, tougher environmental regulations and expensive labour have all “taken their toll,” the Wood Mackenzie report summarizes, while coal prices have tanked.

The benchmark thermal coal price has fallen by 50% in the space of four and a half years. Since its peak in January 2011 at US$136 per tonne (FOB Newcastle), the price has plunged to the US$64 to US$65 per tonne range.

“You’re going to see more bankruptcies,” Dale Hazelton, a senior research analyst at Wood Mackenzie and author of the report, tells The Northern Miner …

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