February 22, 2019 - After hitting a near-term low in early 2016, average U.S. coal mining employment has risen steadily as total production hovers below a rate of 200 million tons per quarter, though the overall trends belie regional differences.

Total U.S. coal production fell 2.5% to 755.6 million tons in 2018, according to S&P Global Market Intelligence data. Production totaled about 774.2 million in 2017 and 728.8 million tons in 2016. Average coal mining employment held steady year over year, gaining less than one-tenth of a percent, or about 625 jobs, from the fourth quarter of 2017 to the same period in 2018. Average total coal mining employment in the most recent quarter was 54,233 jobs, up by 3,662, or 7.2%, since hitting a low of 50,571 in the third quarter of 2016.

A trend of retiring older coal-fired power plants has continued despite a more sector-accommodating regulatory environment brought about by the Trump administration. Initial challenges caused by those retirements and a transition to a greater dependence on natural gas in the U.S. are being worked out by electricity generators and grid operators, Morningstar Commodities Research analyst Matthew Hong wrote Feb. 6.

Utilities still relied on coal during a recent polar vortex, Hong pointed out, but the trend toward greater natural gas reliance continues. “The recent polar vortex highlighted just how much the northeast and the PJM Interconnection system have changed over the last five years. Increased natural gas supply, greater flexibility on the pipeline system, and changes to the generation fleet created a totally different environment than the one seen five years ago,” Hong wrote. “Power and natural gas prices stayed relatively subdued in the face of higher demand and operational challenges on the pipeline system, highlighting the improvements to the grid and PJM’s ability to reliably meet demand in spite of generational weather systems.”

However, production and employment losses in the coal industry have slowed thanks to an increase in global demand for U.S. coal. The market trends that have stabilized coal company balance sheets could translate to stability in employment and production volumes in the near-term, although investment in new supply remains limited.

Companies with exposure to metallurgical coal markets and room to grow supply are particularly well positioned in the market today. Sustained improvement in demand and solid expectations for its future led Arch Coal Inc. to announce a new metallurgical coal mining project in West Virginia. When fully operational, the mine is expected to employ 600 people.