Coal demand is declining in U.S.

Nearly one in five of the tons of coal delivered to U.S. power generators in the first three quarters of 2019 went to power plants planning to close by 2025 or earlier. And the head of a Tulsa-based coal company has a solution.

With no coal-fired power plants on the drawing board at home and diminished demand overseas, U.S. producers will likely struggle to find a new home for tons that were going to the export market as producers compete for what remains of a domestic customer base in secular decline.

Of the 540.5 million tons of coal produced in the first three quarters of 2019, 406.0 million tons were reported as delivered to U.S. coal plants, an S&P Global Market Intelligence data analysis shows. Of those shipments, coal companies sent 19.6% of the tonnage to plants scheduled to retire before the end of 2025.

The domestic market needs to see coal producers pull back on output to match supply to demand, Tulsa-based Alliance Resource Partners LP President and CEO Joseph Craft said on a Jan. 27 earnings call. This year will be an inflection point for producers, according to the CEO.

“Reduced export volumes and tepid domestic coal demand due to persistently low natural gas prices caused a significant oversupply in the United States, creating additional pressure on domestic coal prices and producers,” Craft said. “We continue to believe that current market conditions are unsustainable for most of [Alliance’s] competitors.”

Of the 20.8 million tons of coal Alliance shipped to U.S. power plants in the analyzed period, 11.9% went to plants retiring before the end of 2025.

Source: S&P Global