By Jim Levesque

May 13, 2016 - Unless you’ve been hiding under a rock — perhaps buried by mountainous utility stockpiles — you’ve probably heard the US thermal coal market is struggling. Demand is down. Production has plummeted. Prices are low.

Some of the largest coal producers in the nation have filed for bankruptcy, and most others are doing whatever they can to try and stay in business — a tough task in a market facing more challenges than ever.

But despite the black cloud enveloping the industry, deep down is a seam of optimism filled with hope, recovery and a brighter future. A better coal market is coming, people in the business say, simply because it can’t get any worse than this.

That belief in a better tomorrow is why almost 500 coal professionals flocked to Orlando, Florida, last week to attend the Eastern Fuel Buyers Conference,  one of, if not the, premier industry gatherings of the year.

At the 45th annual event, organizers looked to shine a coal-fueled beacon of hope with a conference theme of “20/20 Vision – Coal’s Path to the Future,” and there was probably no better place to tell that magical tale than at Walt Disney World.

Reality Sets In

While the conference focused on how the US coal industry would eventually transform into a healthier one, notions of King Coal’s return to the throne were nonexistent near Cinderella’s Castle. The reality of today has slowly sunken in, and the carriage has turned into a pumpkin.

Prices for natural gas, coal’s evil stepmother, are still low, and the sinister stepsisters of elevated utility stockpiles and environmental regulations continue to torment the market.

Coal’s Prince Charming, alas, was nowhere in sight — unless that turns out to be Donald Trump.

“We’re all hurting, all parts of the industry,” one producer said at the conference. “You come here looking for hope and looking to talk to the people who are going through the same thing you are going through. You share war stories. You share ideas. You try to figure out what you can do to stay afloat.

“We’re all like a family,” he added. “You see these people every year, and we’re all going through it. You want everybody to do well, but the fact is that isn’t going to happen. You have to see what you can learn here to be the best company you can be until we hopefully see an improvement.”

When a better market develops is a huge unknown. Some in the industry see 2016 as a bottom for US coal, while others at the conference expect 2017 to mirror this year’s struggles.

Consolidation is Key

Despite contrasting views as to when we’ll see coal begin to recover, a consensus among presenters and attendees alike was consolidation is needed before there is any significant improvement in the market. Less coal demand will mean less production and fewer companies supplying power plants.

US thermal coal consumption for the electric power sector topped 930 million st five years ago, dropped to 740 million st last year and could fall to as little as 650-700 million st this year, some have predicted. Consumption figures at the end of 2016 could equal what the new annual demand will be for years to come.

Some consolidation will come through bankruptcies, as companies liquidate assets and other producers scoop up coal mines through the courts. More consolidation could happen as producers look to shrink their footprint or get out of the industry altogether, sources said.

Jim McCaffrey, senior vice president of energy marketing at CNX Coal Resources, spoke at the conference and said more reorganization of the industry not only will come but is needed.

“I think the focus needs to be on regional consolidation rather than national diversification,” McCaffrey said. “Obviously, we have companies that are bankrupt, we have companies that aren’t. I like to say every company in the coal industry has reorganized. Some have done it with the help of the courts, some have done it without the help of the courts, and I think that reorganization will continue.”

Plenty of questions remain as to what will happen this year and further out as the entire energy sector continues its transformation: What will be left after all the big coal bankruptcies? How much coal will utilities burn? When will natural gas prices go up? Will there be a Clean Power Plan?

With all that uncertainty, everybody can agree on only one thing for sure: The US coal industry won’t ever be the same.