By Chuck Jones
January 2, 2019 - Candidate Trump talked a tremendous amount about bringing back the coal industry if he was elected President. Unfortunately for President Trump, and especially coal miners, the industry has been in a secular decline for about a decade, which coincides with the increase in natural gas production.
Energy production from 1949 to 2017
Even with the rollback in regulations by Trump’s EPA the past two years, the U.S. Energy Information Agency projects that U.S. coal consumption will decline 4% this year to 691 million short tons. This will be down 44% since coal’s peak usage in 2007, and the lowest amount since 1979 when Jimmy Carter was President, the Three Mile Island Nuclear Accident occurred and ESPN was launched.
U.S. Coal Consumption for the Past Seven Presidents
1979: Approximately 700 million short tons: Carter’s second to last year in office
1988: Approximately 870 million short tons: Reagan’s last year in office
1992: Approximately 925 million short tons: George H. W. Bush’s last year in office
2000: 1,084 million short tons: Bill Clinton’s last year in office
2008: 1,124 million short tons: George W. Bush’s last year in office
2016: 731 million short tons: Barack Obama’s last year in office
2018: 691 million short tons: Trump’s second year in office
Coal use 1950 to 2018
Source: EIA, Monthly Energy Review October 2018 and Short-Term Energy Outlook November 2018
Exports Have Kept the Industry From Hurting Even More
Coal exports more than doubled from 49.6 million short tons in 2006 to 125.7 million in 2012. However, the increase in exports wasn’t able to make up for the drop in U.S. consumption as it fell from 1,112 million short tons to 889 million (down 223 million) or 20%.
Exports then started to decline from the 125.7 million short ton peak to 60.3 million in 2016. However, they have rebounded in the past two years and should hit about 116 million tons in 2018, based on the first nine months shipments. The export’s increase of 56 million should offset the U.S. projected decline of almost 40 million in the past two years.
The Overall Downward Trend Should Continue
While Trump will doubtless say that the coal industry is “winning”, unfortunately, it will probably continue to decline. More coal-fired plants will close, other countries will lessen their dependence on coal (which should impact exports) and potentially the effects from climate change will be great enough that even Republicans will see the negative consequences.
Coal plant retirements, 2007 to 2020
Source: EIA, preliminary monthly electric generator inventory
Coal mine jobs have seen a small improvement since Trump took office but is minuscule compared to overall job growth. In October 2016 there were 49,500 coal miners, which has grown to 53,200 per the latest job report, an increase of 3,700 jobs.
This compares to total U.S. employment growing from 151.9 million to 156.8 million, almost 5 million more. The increase in coal jobs is 0.07% of total job growth.
Coal prices were in a downtrend from 2011 to the middle of 2016, falling over 60%. They then doubled over the next six months and hit a short-term peak after Trump was elected. Over the next two years they have gyrated down and up but are trading right around where they were two years ago.
The downward movement was not surprising as additional regulations were put in place, which decreased the demand for coal. The initial upturn makes sense as the market anticipated looser regulations from the Trump administration.
The downturn in the first six months after Trump’s election may have been due to the market getting ahead of itself anticipating additional U.S. demand due to fewer regulations. The price rebound is probably due to the strength of the export market creating a situation of demand outpacing production.
Source: Trading Economics