Coal mining declines in U.S., worldwide

Though coal is the United States' main source of electricity generation, mine starts are beginning to decline, according to the U.S. Energy Information Administration.

Though coal is the United States' main source of electricity generation, mine starts are beginning to decline, according to the U.S. Energy Information Administration.

In 2013, 271 coal mines were idled or closed, with less than half as many opening or reopening. This is the lowest number of starts in the past decade. According to a report from Carbon Tracker, 26 U.S. coal companies have gone bankrupt, mainly in Kentucky and West Virginia.

Quitting the coal industry
In September, TECO Energy, Inc. finalized the sale of its coal mines to Canadian company, Cambrian Coal Corp., a subsidiary of Booth Energy, a press release from TECO stated.

Previously valued at $170 million, the mine was sold with no payment upfront and a later payment of $60 million if certain coal mining benchmarks are met, Tampa Bay Business Journal reported. This sale marks the end of TECO's involvement in the coal industry, John Ramil, TECO's Energy chief executive officer, said in a press release.

"The upfront costs to close the mines can be prohibitive," Ted O'Brien, chief executive officer of Doyle Trading Consultants, an analytical firm in Colorado, told Bloomberg. "For the seller of the assets, it's a significant cost savings."

Worldwide coal decline
Coal's decline is affecting other countries as well. According to Bloomberg, Europe will see coal valued below $50 per metric ton in 2016, the lowest it has ever been.

Meanwhile, Australia's coal industry has slowed due to reduced demand from China and rising production, The Wall Street Journal reported.

There are two types of coal produced: that which is used for power generation and that which is used in the steel-making process. Both types have seen decreases since the beginning of 2015, with thermal coal down 15 percent and metallurgical coal down 30 percent.

China's decreased coal production and consumption has set a precedent for the rest of the world. According to the EIA, China accounted for 46 percent of global coal production and 49 percent of global coal consumption.

However, due to a declining economy and efforts to wean itself off coal use, China's demand for coal has dropped this year, according to The New York Times. Last year, China's government promised to peak its coal consumption by 2030, but after considering the rate the country is going, some say peaking in 2025 is a possibility.

"It's a question of political will — of whether China can carry through on its current thinking, of whether there's enough strong political will to refrain from going back to the old mentality," Ranping Song, who monitors the emissions-cutting efforts of developing nations for the World Resources Institute, told the Times.

Despite lowered coal demand in China, Australia's coal company BHP Billiton Ltd. is confident the market will improve, The Wall Street Journal reported. While many countries are making efforts to cut carbon emissions and reducing coal-generated power, the material is still essential in the steel-making process.

"We expect continued growth in demand for met coal for quite a while yet, driven by ongoing economic growth in China and by the emergence of India as a major steel producing nation," Mike Henry, the head of BHP, said during a speech in Australia.

For more information about the coal industry, visit PennEnergy's research area.

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