Since the coronavirus hit the U.S., coal mines across the country have begun to shut down, lay off workers, and slow down production. Bankruptcy is everywhere in the industry.
"Just about everything that can go wrong, has gone wrong for the coal industry," says Matthew Preston, a coal analyst at the firm Wood Mackenzie. He says coal demand this year is down between 35 and 40% from last year, "and last year wasn't a great year."
Coal has been struggling for a number of years. There is now a drop in demand due to the economic shutdown (as well as the warmer weather), but coal is being pumped more than other energy sources.
Preston says that coal is now more expensive than natural gas, wind or solar in many parts of the country. So, when demand slows down, coal plants are the first to shut down.
In fact, three days earlier this month, wind and solar actually produced more electricity than coal in the U.S., the first time that has happened, according to a new research note from the Rhodium Group.
Rhodium found that coal accounted for only 16.4 per cent of U.S. electricity from mid-March to mid-April, compared to 22.5 per cent for the same period last year.
All of this means that — just like oil glut — there's too much coal sitting around.
"We're seeing coal stockpiles run up to some historically high levels," says Joe Aldina, a coal industry analyst with S&P Global Platts. He says it's "actually pushing the physical constraints of the coal fired generation system."
Andrew Blumenfeld, an IHS Markit research analyst, says that coal reserves at power plants are "basically double what it should be at this time of year." He also suspects that excess inventory is forcing some mining companies to shut down.
Blumenfeld has been in the coal industry for three decades, and he says he has never seen such a sudden and severe downturn.
"We're seeing coal production numbers and power generation numbers from coal going back to roughly late 1960s, mid-1970s levels," he says.
Joe Aldina and S&P Global Platts say that coal-fired power plants could decide to run at a loss this summer, just to burn off excess stock. He sees a potential rebound for coal next year if the prices of natural gas rise as expected.
But Manan Ahuja, another S&P Global Platts analyst, says that utilities could also decide to withdraw coal-fired power plants.
"If you lose some of that capacity permanently," Ahuja says, "it's not going to come back."
