By SARAH KENT
The US coal industry faces a difficult period at home as
shale gas reduces the fuel's share in power generation, but its
problems are set to worsen as export markets diminish and large
swaths of the industry could have to shut, the International
Energy Agency warned Tuesday.
US coal consumption will fall by 14% between 2011 and 2017
as power stations burn increasing amounts of cheap shale gas,
but the European export outlet that has helped sustain the
industry through the early stages of this shift won't last as
carbon emissions regulations there tighten, the IEA said.
The result is likely to be mine closures and job losses in some
of the poorest U.S. regions, it said.
"If domestic coal demand remains sluggish and international
coal prices low, large shares of coal production in the United
States will eventually become unprofitable," said the
Paris-based IEA, which advises rich industrialized countries on
energy policy, in its medium-term coal market outlook.
The US coal industry's woes are the flip side of a six-year
boom in natural
gas production as companies have used new technologies to
unlock vast reserves previously trapped in shale rock
formations stretching from Texas to New York.
The resulting fall in natural gas prices has encouraged a shift
away from coal in power generation, putting pressure on the
world's second-largest coal industry.
Although coal remains the backbone of the power system in
the US, natural gas increased its market share by almost six
percentage points between 2005 and 2011. Last year, natural gas
accounted for 24% of the electricity generated in the country,
while coal provided 43% of US electricity generation.
The US coal industry has responded by increasing exports,
primarily to Europe where recent low prices for permits to emit
carbon dioxide and high prices for natural
gas have made coal more attractive.
According to the IEA, US seaborne coal exports increased by
31% in 2011 compared with 2010 to 97 million metric tons, the
highest level in the last two decades.
But growth in European demand for coal is expected to be
sluggish over the next five years as regulations governing the
emissions of carbon dioxide from power stations get more
stringent and renewable energy production grows.
The trend is already apparent. German utility E. ON AG said
Monday it had ceased commercial operations at a coal-fired
power station in Kent in the southeastern UK in response to
European Union legislation limiting carbon emissions.
"2013 will be a good year for US coal exports, but then it
will become more difficult for the coal to come to Europe,"
said Laszlo Varro, head of the gas, coal and power division at
That is bad news for the US coal industry. Estimates already
peg production cuts at around 60 million tons this year, or
around 6% of the country's coal production in 2011, the IEA
said. By contrast, supply of natural
gas is estimated to have increased by around a quarter
between 2006 and 2011.
"Given sustained weak coal demand over the outlook period,
parts of the coal industry in the United States will have to be
restructured and consolidated in the coming years," the report
Closing 60 million tons a year of mining capacity in the
second-largest US mining region, Appalachia, might result in
the loss of 9,000 to 15,000 direct mining jobs, the IEA said.
The majority of mine consolidation would likely take place in
West Virginia and Kentucky, among the 10 poorest states by
gross domestic product per capita, it said.
However, the IEA said it was likely many employees of the
mining industry would be able to find new jobs. "Given that the
US economy is recovering and the shale gas industry is looking
for a lot of people with technical qualifications you will
probably see former coal miners finding employment in shale
gas," said Mr. Varro.
Dow Jones Newswires