The US coal industry is facing a wave of bankruptcies. Nick Cunningham, of OilPrice.com says:
The coal markets have collapsed in spectacular fashion over the last few years due to a perfect storm of factors. U.S. coal producers first had to compete ferociously with shale gas in America’s electric power sector as fracking took off about a decade ago. That forced an array of coal plants to shut down as cheap gas washed over the country. Subsequently a regulatory crack down from the federal government – including forthcoming restrictions on greenhouse gases – further dimmed the growth prospects of coal.
But U.S. coal producers always had the international market, and exports stepped up in concert with falling domestic consumption. Now the foreign buyers are shrinking as well. China, the one country that the coal industry could count on for ceaseless growth in coal consumption, actually burned 2.9 percent less coal in 2014 than it did the year before.
When China, which consumes about as much coal as the rest of the world combined, sees its level of coal burning stay flat or even fall, that raises red flags for the entire industry.
Here are the specifics from IEEFA’s Tim Buckley:
When the largest coal producer in China puts out the kind of numbers China Shenhua Energy Co. just reported, it’s an unmistakable signal that the most populous country on the planet is continuing to step back from coal.
In announcing its 2014 results and its 2015 business targets, Shenhua dropped some bombshells:
- It sees a 10 percent drop in its domestic coal sales in 2015 (that’s a 47 million tonne reduction to 404 million tonnes).
- Its capital expenditure plans for coal and power generation in 2015 are down 25 percent over 2014 to $3.2 billion.
- It expects its ports and rail investment to drop 12 percent year-over-year to $2.5 billion.
The numbers reveal a strategic shift by Shenhua as it reduces its volumes, its operating costs and its capital spending, and the 2015 numbers in particular signal an acceleration in this strategy. These trends are bigger, actually, than Shenhua. The company has a 15 percent share of the Chinese coal market, so it’s a key barometer of the larger picture, and its cutbacks send a clear signal that China is intent on curbing its emissions by a rapid diversification away from coal.
You read that right: “a clear signal that China is intent on curbing its emissions by a rapid diversification away from coal.”
Gone are the days when Bill Raney, president of the WV Coal Association, can claim that the US doesn’t have to do anything about carbon emissions, because China isn’t. Gone are the days when Mr. Raney can claim that WV coal miners will be back at work soon exporting coal to Germany and China.
Real world economics have caught up to the coal industry and no amount of US or WV government subsidies can save it.
And where is China turning for energy? Here it is from Jack Perkowski at Forbes:
According to The Global Status Report, which was released earlier this month by the Renewable Energy Policy Network for the 21st Century, China once again led the rest of the world in renewable energy investment in 2013, spending a total of $56.3 billion on wind, solar and other renewable projects. The report stated that China accounted for 61 percent of the total investment in renewables by developing countries, and that China invested more in renewable energy than all of Europe last year.