Wall Street's Cold Shoulder Drives Coal Veteran to the Exit
By Will Wade
October 6, 2019 - After running two major coal producers over a decade, Kevin Crutchfield decided it was time to move on when Wall Street began shunning the fuel.
While coal’s price volatility was always a challenge, the increasingly cold reception from investors proved a bigger hurdle, according to Crutchfield, the former head of Contura Energy Inc. and Alpha Natural Resources Inc. Lenders started to turn their backs and shares of producers were undervalued. The grim long-term prospects for an industry that’s a major driver of climate change didn’t help either.
Photo by Compass Minerals
“You felt like you were working really hard to create value but there was no recognition of it in the public markets,” he said in an interview. “The free markets have decided we don’t need as much coal as we used to.”
Kevin Crutchfield handout
Crutchfield, 58, has now made the jump to an industry that’s more predictable and less vilified -- salt mining. In May, he became chief executive officer of Compass Minerals International Inc., an Overland Park, Kansas-based supplier of industrial salt. Its biggest use is for deicing roads in the winter, as well as agricultural and industrial applications.
It’s a very different market. Most deals are won by submitting sealed bids to municipalities, and Crutchfield said the price has inched upward about 1% to 2% a year on average for the past 15 years. In contrast, coal in Newcastle, Australia -- a key benchmark -- is down 30% this year; it slumped more than 2% on Thursday.
“The price volatility that I’m used to doesn’t exist here,” he said. “It makes it a lot easier to think long term instead of how am I going to get through the middle of next week.”
The coal industry has changed significantly over the three decades Crutchfield spent at fossil fuel companies, as global warming was recognized as a significant environmental threat. One big shift in recent years is that companies have found it harder to attract investors because of increasing pressure on financial companies to help fight climate change. Some portfolio managers told him they were prohibited from making coal deals.
“The institutions that you meet with now look so different than the ones you used to deal with,” he said.
That’s unlikely to change. Utilities in the U.S. and Europe are turning away from coal. While it’s still widely used in emerging markets, especially in Asia, the long-term view is that its role in making electricity will inexorably decline. While there’s still demand for the variety used to make steel, the volumes are much smaller than thermal coal used in power plants. The fuel’s economics are also under threat from cheap gas and renewables.
“If you’re a believer in free markets, then you have a choice to make,” he said. “Thermal is in a constant state of decline or decay, any way you slice it or dice it.”