Boosted by higher prices and presidential promises of aid, U.S. coal is having a comeback season. Yet a looming quandary remains: Demand continues to shrink.
In the boom-bust cycles of old, the fuel’s use grew relentlessly as a fleet of coal-fired power plants fed America’s hunger for electricity. Now, a new age of clean, cheap natural gas and renewables has emerged, thanks to the shale boom and fears of global warming. That’s led to almost 50 gigawatts of coal-fired generating capacity being shut down since 2012, enough to power New York and Vermont combined. And no new coal plants are being built.
In the past decade, six major suppliers have gone bankrupt, some more than once. Now, some producers say they’re remaking their playbooks to survive in a dwindling market. High rates of return and credit ratings are seen as more key to the future than boosting production.
“Lots of management teams in the past were focused on volume, volume, volume,” George Dethlefsen, chief executive officer of Corsa Coal Corp. in Canonsburg, Pennsylvania, said in a phone interview. “Well, wait a second guys. Let’s think about leverage ratios, credit metrics. Let’s think about rates of return. Those are the metrics you need to be focused on.”
Over the last six months, the U.S. industry has gained as China, the world’s largest producer and consumer of coal, curbed its own production. That drove spot prices of metallurgical coal used in steelmaking to nearly triple last year to $226 per metric ton, according to The Steel Index. While prices have since eased back to $168.40 as of Tuesday, they’re still twice as high as a year earlier.
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