Slowing economic growth in major global markets will limit demand for coal.
New York, NY (PRWEB) January 05, 2014
The Coal Mining industry has struggled over the five years to 2013, with revenue expected to decline an average of 5.4% annually to $43.5 billion. The prices of thermal and metallurgical coal have declined over the period, including drops of 20.3% and 33.9% in 2012, respectively. “These price declines were largely due to Australian coal reentering the market after the 2011 floods, the emergence of natural gas as a substitute for coal in electricity generation, a slowing Chinese economy and a mild winter in the United States during 2011 and 2012 that reduced demand for thermal coal,” according to IBISWorld Industry Analyst James Crompton. Consequently, coal stockpiles have remained high around the globe, depressing prices and causing industry revenue to contract to an estimated 5.8% in 2013.
Significant merger and acquisition activity is also present in the industry, as operators attempted to acquire as much affordable metallurgical coal as possible. However, industry players purchased smaller metallurgical coal mines that struggled during the recession. Moreover, metallurgical coal in the United States is highly sought after because of its perceived superior quality over coal found in most other countries. Emerging economies have demanded metallurgical coal (i.e. coal needed for steel production) at accelerating rates, boosting exports over the past five years. “Consequently, industry operators have had to scramble in order to expand through acquisitions,” says Crompton.
Coal prices are expected to drop in two out of the next five years, as slowing economic growth of major global markets (e.g. China) places downward pressure on product prices. Slower growth in emerging economies will also hurt demand for US metallurgical coal and will cause prices to stagnate. Furthermore, natural gas will continue to erode coal demand over the next five years, as the appetite for alternative sources of electricity is expected to expand globally. Although demand from emerging economies will not rival prerecession levels, they will still demand metallurgical coal at high rates to satisfy steel requirements. Additionally, the consumption of electric power is projected to expand, offering some relief to industry operators.
For more information, visit IBISWorld’s Coal Mining in the US industry report page.
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IBISWorld industry Report Key Topics
Operators in the Coal Mining industry mine various types of coal, and this will often occur either underground or in surface pits. Most coal mines consist of bituminous coal or anthracite (types of black coal), but companies might excavate lignite (brown coal) as well. Industry operators also develop coal mine sites and prepare the coal for sale by washing, screening and sizing the material.
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