July 12, 2018 Read More →

Trump’s promises seen as ineffective in halting coal’s long-term market problems

S&P Global Market Intelligence ($):

President Donald Trump and the coal industry’s mutual affinity may have improved investor sentiment toward the sector, but whether companies can parlay that into real market results is far from clear.

The dispositions of coal miners and coal executives alike have vastly improved since Trump won the election. Industry conferences and events once punctuated with dark humor, pessimism and war-like rhetoric are now filled with optimism about the future despite susceptibility to a secular decline in consumption, partially masked by recent success in moving coal to the booming seaborne market.

Despite the optimism, domestic U.S. coal consumption has continued to decline, and overall production has hardly budged under Trump as he continues to praise the country’s “beautiful, clean coal.” Supporters of the president in the coal industry, however, say greater certainty and improved sentiment toward their industry have helped.

Support for coal coming from the administration is important to how the rest of the country perceives the coal industry, said Betsy Monseu, CEO of the American Coal Council. A financially healthier coal industry supercharged by positive sentiment from the White House is again attracting investors to the sector, she added. At the same time, she said, marketplace and policy issues that have “tilted the playing field away from coal” remain.

While the media often focuses on high-profile events, investors are far more likely to pay attention to the effects of gradual, fundamental shifts in technology trends and societal preferences, wrote Samson Mukanjari and Thomas Sterner of the University of Gothenburg’s economics department, in a study analyzing the market impacts of the last U.S. presidential election and the Paris Agreement on climate change. The lack of a sizable global reaction to the election of Trump—with his desire to promote coal and threats to pull out of international climate agreements—surprised the researchers, Mukanjari said.

“Everyone recognizes that Trump has four [or] maybe eight years in office, and that makes it harder to make long-term investments in the sector,” Mukanjari said. “The major challenges facing coal may have little to do with global climate policy but technological developments that have made alternatives to coal much cheaper and changes in consumer preferences among other things. To this end, attempts to promote coal will face similar challenges.”

More ($): Trump lifted coal’s spirits, but turning that into market success is a challenge

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