December 2021
Coal remains on a structural decline in the United States although 2021 is expected to be the first year since 2013 that consumption increases. US Metallurgical coal exports are forecast to make an increasing contribution to the export market with 36.5Mt in 2021 and 41.7Mt in 2022.

During 2020, the country reported approximately 32Mt of metallurgical coal. With the seaborne market volatility, about 13.6% of total US coal production is anticipated to be exported in 2021 and 16.2% in 2022. This significant increase in the seaborne market reflects how the Chinese ban on Australian coal has shifted the global coal market.

During 2021, US metallurgical coal exports to China massively increased, accounting for more than 8Mt in the first three quarters of the year. US metallurgical coal imported by Chinese users increased by about 1244% compared to the previous year corresponding period. China’s ban on Australian coal has greatly benefited the country, considering the US exported a total of 30.33Mt in the same period, and exports to China accounted for 27% of this export volume. As a contrast, the US only delivered to China 2.2% of 27.99Mt exported in the first three quarters of 2020.

Coking Coal Industry Background

Currently, U.S. metallurgical coal is produced in Alabama, Arkansas, Pennsylvania, Virginia, and West Virginia. Historically, coking coal was also produced in 15 other states. The United States is expected to rank as the third largest exporter of metallurgical coal globally, accounting for about 11% of the global export coking coal supply. However, the country is expected to drop some places in the list by 2040 as it does not plan to significantly increase its metallurgical coal capacity.

The infrastructural, financial and labour market around North American coking coal keeps limiting the industry's ability to keep pace with demand, which is forecast to continue strong in 2022. As previously mentioned, US exports recovered compared to 2020 due to the sharp rise in Chinese. However, deliveries to most traditional customers in Europe and Latin America fell as US suppliers sought to take advantage of historically high spot prices in China.

Even though traditional buyers had significant recovery of steel production over the same period, US shipments to the EU fell by 21.4% year on year in the third quarter of 2021, and shipments to Brazil fell by 33.3%.

In response to the Covid-19 pandemic, mining companies sharply cut production last year, leaving the industry unprepared to quickly return to pre-pandemic production levels unable to follow growth of demand. The impact of the pandemic in the US triggered a labour shortage in the coal mining and transport industries, which combined with the global banks’ efforts to support decarbonisation plans in the steel industry have limited new capital availability for coal producers.

Coal mine operators will continue to raise output where possible, gaining some ground on demand. However, labour scarcity will continue to be the biggest factor constraining US coking coal supply in the near future. Industry participants do not expect the current conditions to significantly change. Therefore, the country supply response will remain insufficient to balance demand in the foreseeable future.

New Projects

Arch Resources officially announced the opening of its new metallurgical coal mine, Leer South, near Philippi, West Virginia, by the end of August 2021. The operations team started to move the longwall mining equipment underground in preparation for start-up and completed a 30-day suspension of development mining as part of the plan to tie the upgraded conveyance systems into the new preparation plant.

After a final investment of $392m on the project, the company anticipated up to 3.6Mtpa of high-vol A metallurgical coal for the export market. The ramp up of Leer South came at a crucial time with the global economy recovering from the Covid-19 pandemic and steel makers struggling with constrained metallurgical coal supply amid the China’s ban on Australian coal.

Arch Resources set the goal for its metallurgical coal sales volume in 2021 at the range of 7.4Mt to 8.2Mt. The company expects to strengthen its position as the leading supplier of High-Vol A coking coal globally and increase its coking coal profit margins across a wide range of market conditions.

Additionally, with the purpose of expanding the metallurgical coal production, CONSOL Energy Inc. is going ahead with its Itmann metallurgical coal project in West Virginia. The project intends to develop Itmann coal mine in the Wyoming County and ship metallurgical coal to the domestic market within the U.S. The type of coal produced is LV metallurgical coal. Volume averaging from 0.6 to 0.9Mt of saleable coal is expected to be produced annually for a period of at least 20 years. Once the mine reaches full capacity production, the production scale of metallurgical coal by CONSOL will go up to 2.5Mtpa.

The metallurgical coal industry in the US only has a few projects in view. There is no coal pipeline in the the country and the structural transformation away from coal could happen irrespective of the political will.

Coal Phaseout

The Biden administration has officially committed the US to net zero emissions by 2050. The US presented a long-term strategy to the UNFCCC in November 2021, which makes assumptions on CO2 removal by land-based and technology-based solutions and covers all greenhouse gas (GHG) emissions. The country will need to deploy a range of new technologies to hit the target, combining renewable energy sources, sustainable fuels like hydrogen and biofuels, energy saving technologies and including nuclear power in the energy mix.

The US long-term plan also addresses the need to scale up carbon removal to be able to achieve the net zero. Meanwhile, the White House has refused to sign a pledge to phase out coal in the coming decades. Although only few countries have stricken coal as hard as the United States in the last decade with dormant electricity demand, low natural gas prices and declining cost of renewables that have prompted the shutdown of US coal plants, yet the coal industry still retains political power.

US coal generation increased in 2021 amid the rise in natural gas prices, with the rebound expected to last through 2022. Although the country closed about a quarter of its coal capacity in the last decade and it is scheduled to close another quarter by 2030, it remains the world’s third largest coal consumer.