July 16, 2020 Read More →

Moody’s: U.S. utility sector coal consumption could fall more than 30% in 2020

S&P Global Market Intelligence ($):

Moody’s Investors Service expects “very weak” second-quarter earnings in the U.S. coal sector because of falling electricity demand amid the coronavirus pandemic, saying it sees 2020 coal consumption by power utilities shrinking more than 30%.

“The U.S. coal industry has weakened after taking the brunt of lower electricity demand and is now highly vulnerable to resurgent coronavirus infections that could further reduce demand for coal in a downside scenario,” Moody’s said in a July 15 note.

Meanwhile, coal export prices continue to weaken, with the firm noting that global steel production, which depends heavily on metallurgical coal as an input, fell about 5% through May.

Moody’s also noted that it took negative ratings actions in the first half on most of the North American coal producers it covers, with a couple of exceptions.

“Only the low-cost, met-focused producers such as Arch Resources Inc. (Ba3 stable) and Warrior Met Coal Inc. (B2 positive) have not experienced a recent downgrade to long-term ratings nor an outlook revision, as they have fundamentally stronger discretionary cash flow generation than their peers — free cash flow before considering dividends and expansionary capital spending,” Moody’s wrote.

The U.S. coal sector has been hit by a wave of bankruptcies driven in part by the pandemic and competition from other energy sources such as gas and renewables. Coal has also fallen out of favor in some jurisdictions as governments and consumers push for lower-carbon alternatives. Moody’s projected that aggregate EBITDA for rated U.S. coal producers would slump by about 50% in 2020 and said the sector faces further downgrades if the pandemic significantly worsens.

[Kip Keen]

More ($): Moody’s expects US coal producers to report ‘very weak’ Q2’20 earnings

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