March 16, 2015 Read More →

Moody’s Changes Its U.S. Coal Outlook, for the Worse

Moody'sMoody’s last week substantially lowered its outlook for the U.S. coal industry, saying low natural gas prices will continue to eat away at the U.S. thermal coal industry and that less demand from China will diminish the market for U.S. metallurgical coal.

The rating change was from stable to negative.

The news gets limited attention in the press, but SNL picks up on it in coverage by Rohan Somwanshi, who writes that industry trends will “exacerbate the industry’s long-term, secular decline.”

Excerpts:

  • “’We expect industry earnings to drop 6%-8% over the next year or so,’ Moody’s analyst Anna Zubets-Anderson said. “‘All North American miners will be challenged by current conditions, but lower-rated U.S. met coal producers including Arch Coal Inc., Alpha Natural Resources Inc., Patriot Coal Corp. and Walter Energy Inc. will be the most vulnerable.’”
  • “‘At these price levels, as much as half of global production is uneconomic and further production cuts will be necessary to bring the markets back into balance. We believe that met coal prices are unlikely to materially recover until the second half of 2016, as the market remains oversupplied,’ Zubets-Anderson said.”
  • “Moody’s said the U.S. thermal coal industry is facing challenges due to weak natural gas prices and the implementation of the U.S. EPA’s Mercury and Air Toxics Standards over the next 12 months. It expects that lower gas prices may drive some coal-to-gas switching in the next several months.”

Full article (subscription required).

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