Despite US economic activity reversing 2020’s drop in coal demand, the fundamental decline in the US coal mining sector has been mainly driven by the fracking revolution that drove down natural gas prices. This factor has significantly reduced the country’s coal-fired generation demand, with over 130GW of coal-fired capacity retired in the last decade.
This lower demand has resulted in
coal mine closures. The expansion of natural gas in electricity generation
prompted the coal-to-gas switch, while pre-pandemic low gas prices incentivised
the retirement of ageing coal-fired power plants in the country.
The United States has pledged to
reach net zero by 2050. This target covers all sectors and all greenhouse
gases. This will drive the structural decline in the thermal coal industry. The
Biden Administration has announced a goal for a carbon-free power system by
2035. This will further prevent any progress in new thermal coal projects or
expansions as the country focuses on neutral-carbon developments.
US carbon emissions surged by 6.7% to
4.7Gt in 2021. However, emissions in 2020 had fallen by 10%, as the country
responded to the Covid-19 pandemic. Emissions from energy consumption dropped
to the lowest level in almost four decades, with the largest decrease on
record.
Tighter environmental regulations and
pressure on emissions reduction targets have triggered a lack of funding in
thermal coal projects. Although the US did not join the pledge to phase out
coal at the Glasgow Climate Change Conference, the country’s thermal coal
production has been rapidly declining at a CARG of -6.6% over the last ten
years.
The US produced 425Mt of steam coal
in 2021, up by 9% from the historic low level registered in 2020. In 2021,
output remained 20% below the 527Mt produced in 2019. The domestic supply
totalled 436Mt in 2021, up by 17% from 2020, but down by 6% from 2019. Exports
from the US skyrocketed by 43% to 35Mt in 2021 from 24.5Mt shipped in 2020,
very similar to 2019 levels.
AME forecasts that the US will export
31Mt of thermal coal in 2022, down by 13% from the high level recorded in 2021.
The US has been seen as an alternative to Russian energy as a result of
post-invasion sanctions.

The country has significantly
increased its coal exports to Germany, Italy and the Netherlands. Yet overall
US exports will not surge due limited capacity, with logistics and terminal
storage space now fully allocated. As seaborne prices fall, higher-cost US
output is expected to become less competitive.
US thermal coal exports reached a
13-month high in April, as international buyers sought to restock supplies, and
continued rising through the June quarter of 2022. Coal shipment volumes
increased 15% on the quarter to 22Mt and climbed 4.6% on the year.
All-time
high gas prices and the lack of new project investments have also supported the
surge in thermal coal prices. However, rail transportation constraints,
weakening demand in China and fears of a global recession pose risks to the
sector.
With coal prices hitting record
highs, US miners are seeing strong domestic demand and increasing exports to Europe.
Peabody Energy remains the leading US coal producer. However, the company has
lowered its full year production guidance for seaborne thermal coal by 0.9Mt to
1.2Mt as severe rain and Covid-19 related absenteeism impacted mines’
productivity. The updated seaborn thermal coal guidance for 2022 is expected to
be between 14.5Mt and 15Mt.

The Powder River Basin’s (PRB) output for
2022 is expected to be between 73Mt and 82Mt, down from the initial target of
80Mt to 86Mt, due to poor rail performance and uncertainty around improvement
to meet current year customer nominations. In the June quarter of 2022, PRB’s
sales fell by 10% on the quarter and 18% on the year. AME expects that Peabody
will export around 11Mt across all its operations in 2022.
Peabody has pledged to achieve net-zero
emissions by 2050. Peabody's first incremental target is to reduce Scope 1 and
Scope 2 GHG emissions by 15% by 2026, from its 2018 base. Over the past
three years, Peabody has increased renewable energy usage by almost 37%, with
nearly 26% of its total energy usage coming from renewable energy sources.
Consol Energy is a US energy company
with operations in the Appalachian region. Currently, the company runs the
Pennsylvania Mining Complex, located in Greene and Washington counties, which is
the largest underground coal mine complex in North America. The coal complex consists
of the Bailey, Enlow Fork and Harvey mines, along with the central preparation
plant and train loadout facility.
By February, Consol had sold almost
all its forecasted production for 2022. Consol Energy has contracts to deliver
over 16Mt of total coal in 2023. The company’s total Scope 1 emissions were
5.74Mt of CO2e, Scope 2 emissions were 0.43Mt of CO2e, and Scope 3
emissions were 53Mt of CO2e.
The miner aims to reduce direct operating GHG
emissions by 50% compared to 2019 by the end of 2026 and achieve net-zero
operating emissions by 2040, with a current focus on energy management and
operational efficiency efforts.

Hallador Energy Company (HNRG) will
resume operations at its Freelandville coal mine. Freelandville is an open-cut
thermal coal mine in Indiana, US, which has been on care and maintenance since
2016. The company aims to restart mining activities immediately to increase
supply to Merom Generation Station.
Merom is a coal-fired thermal power station
located in Indiana, with an output power of 1GW. HNRG will finalise taking over
Merom in the September quarter of 2022. Merom is expected to consume up to 50%
of Sunrise’s coal production.
HNGR acquired Freelandville mining
complex from Triad Mining in 2016. The company is also currently running the
underground Oaktown Mine 1 and Oaktown Mine 2 in Indiana. HNRG has concluded a
sales contract to deliver 6.2Mt in 2022, 4.8Mt in 2023 and a total of 5.7Mt
from 2024 to 2027. In addition, HNRG plans to develop Prosperity open-cut coal
mine, a new thermal coal mine in the Pike County, Indiana.
In June 2022, the US Supreme Court
ruled to limit the EPA’s ability to regulate carbon emissions from power
plants. However, cheaper renewables are decarbonising the US power sector,
driving coal out of the electricity market. The ruling is unlikely to impact
this trend.
Although the US thermal coal supply market has seen several mines
recommencing production since early 2021, these operations will remain
profitable only under current high prices and will potentially struggle with
productivity in the medium term.