Coal is getting to be worth less than dirt

Coal is having a hard time lately. U.S. power plants are switching to natural gas, environmental restrictions are kicking in, and the industry is being derided as the world’s No. 1 climate criminal. Prices have crashed, sure, but for a real sense of coal’s diminishing prospects, check out what’s happening in the bond market.

Bonds are where coal companies turn to raise money for such things as new mines and environmental cleanups. But investors are increasingly reluctant to lend to them. Coal bond prices tumbled 17 percent in the second quarter, according to an analysis by Bloomberg Intelligence. It’s the fourth consecutive quarter of price declines and the worst performance of any industry group by a long shot.

Bonds fluctuate less than stocks, because the payoff is fixed and pretty much guaranteed as long as the borrower remains solvent. A 17 percent decline is huge, and it happened at a time when other energy bonds—oil and gas—were rising. Three of America’s biggest coal producers had the worst-performing bonds for the quarter:

Alpha Natural Resources: -70 percent
Peabody: -40 percent
Arch: -30 percent


The map shows coal plants in 2010 that may be headed for retirement. Blue circles represent plants that will be shuttered by 2020, while yellow will convert to gas, and red have undetermined futures.

About 17 percent of U.S. coal-fired power generation will disappear over the next few years, according to an analysis by Bloomberg New Energy Finance (BNEF). Obstacles include age, the abundance of cheap natural gas, and new EPA rules to cut pollution…

Even China, the world’s biggest consumer of coal, wants to be rid of it…While China’s electricity demand will soar in the coming decades, its coal use will remain relatively flat, peaking by 2030 and then declining, according to BNEF. The pollution is too thick and the alternatives too cheap for coal to flourish…

But even setting aside the environmental and health issues, renewables are on a trajectory to outcompete fossil fuels, starting with coal. Between now and 2040, two-thirds of the money spent on adding new electricity capacity worldwide will be spent on renewables, according to BNEF…

Pigs like the Koch Bros and their bed-buddies ExxonMobil et al are putting their last hopes into the Republican Party. Unlike their peers in archaic monarchies like Saudi Arabia, they have to confront minimal papier mache democracies like the United States. Conservatives like Republicans or Blue Dog Democrats needn’t involve themselves with science to decide policy. Their only decision is whether they require a new wheelbarrow to carry away the dollar$ on offer from the barons of fossil fuel – or the old one is adequate.

It only remains for the crowd in charge of the Democrat Party to decide if they will listen to reason, evidence-based science and concern for future generations of our species. For some that’s still a difficult questions.

8 thoughts on “Coal is getting to be worth less than dirt

  1. Memento mori says:

    “In Appalachia, the coal industry is in collapse, but the mountains aren’t coming back” http://grist.org/business-technology/in-appalachia-the-coal-industry-is-in-collapse-but-the-mountains-arent-coming-back/ “In the first half of this year, at least six domestic coal companies filed for bankruptcy. …In August came the biggest announcement of all: the $10-billion coal giant Alpha Natural Resources had entered the bankruptcy sweepstakes, too. Only four years earlier, Alpha had secured its position as one of the world’s largest coal outfits by purchasing the Appalachian company Massey Energy for $7 billion and expanding its operations to 60 mines, many in Appalachia. By late July, the New York Stock Exchange announced that it had suspended trading of Alpha Natural Resources’ stock because it was worth next to nothing. In August, the inevitable occurred. Alpha submitted a bankruptcy filing which read in part: “The unprecedented changes facing the coal industry run deep and are occurring at a frenetic and unpredictable pace … The U.S. coal industry as currently structured is unsustainable.”

  2. Meanwhile says:

    (Aug 4th) “California passes bill to kick coal out of its pension funds” http://arstechnica.com/science/2015/09/california-passes-bill-to-get-its-pension-funds-out-of-coal/ “In a statement after the bill’s passage, California Senate president pro tempore Kevin de León said, “Coal is losing value quickly, and investing in coal is a losing proposition for our retirees; it’s a nuisance to public health; and it’s inconsistent with our values as a state on the forefront of efforts to address global climate change. California’s utilities are phasing out coal, and it’s time our pension funds did the same.”

  3. Harbinger says:

    Arch Coal, the second-largest producer of coal in the United States, has filed for Chapter 11 bankruptcy protection. The company operates mines in Colorado and Wyoming, as well as five other states, and currently has about $457 million in unsecured reclamation liabilities in Wyoming.
    Arch Coal’s woes are indicative of the coal market overall, with the Energy Information Administration reporting that coal production in the U.S. hit a 30-year low last year. http://trib.com/business/energy/arch-coal-files-for-bankruptcy-protection/article_5d71b417-9e59-50b4-b3f1-e063c0a5a611.html …”They have assets that should remain in operation. It is really a question of making sure balance sheet and debt load they carry matches a company of that size. When you look at that debt load, it made sense looking backwards at 2011 when they were making a lot of money. The problem is they were looking at a peak and thinking it was a new normal.” Kristoffer Inton, an analyst who tracks Arch Coal at Morningstar, discussing the company’s decision to file for Chapter 11 bankruptcy.

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