January 17, 2020 Read More →

Brutal year for U.S. coal companies shows that markets trump rhetoric

St. Louis Post-Dispatch:

With a mining-friendly administration in power in Washington, coal was supposed to be making a comeback by now.

Instead, the industry just finished a brutal year. The Energy Information Administration estimates that U.S. coal production fell 9% last year and will decline by 14% in 2020. The downhill slide is reflected in the stock prices of St. Louis area coal companies.

Peabody Energy and Arch Coal were supposed to have put their problems behind them after bankruptcy filings in 2016. They emerged optimistic that reduced debt and low costs would allow for solid profits, even in a declining industry. The trouble is, utilities’ demand for coal fell faster than expected.

Peabody’s shares have lost 72% of their value since the start of last year. Arch shares are down 17%; it’s been cushioned by relatively strong demand for metallurgical coal, which is used in steelmaking. A third St. Louis company, Foresight Energy, was delisted by the New York Stock Exchange and its shares fell 98% last year.

These results hardly support the “coal is back” message that President Donald Trump delivered at a campaign rally in West Virginia in 2018. They don’t even back the notes of cautious optimism that industry executives were sounding a year ago.

What happened? “Coal is rapidly falling out of favor in the marketplace,” says Clark Williams-Derry, an analyst at the Institute for Energy Economics & Financial Analysis. “It’s too expensive, and the alternatives have gotten cheaper.”

[David Nicklaus]

More: Trump said ‘coal is back,’ but the stock market says otherwise

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