US coal’s upturn favors open-pit mines in western states

3 Nov 2017   Coal

The US coal industry has been making a comeback this year, hailed this week by President Donald Trump. In the power generation sector, however, only one variety of the fuel is in demand — low-cost production from the large open-pit mines of western states such as Wyoming. The trend has buoyed listed US mining groups Peabody Energy and Arch Coal, which have both emerged from bankruptcy after the wave of failures that swept the industry in 2015-16. But it is a bad sign for the Appalachian region, including states such as West Virginia and Kentucky, which Mr Trump has pledged to help. Healthy demand for thermal coal, used for power generation, from the Powder River Basin of Wyoming and Montana is helping support a US mining industry that is focusing on controlling debts and returning cash to shareholders. Coal production has been rising across the US, but the boost to output in Appalachia has come from more volatile export sales and metallurgical coal, used for making steel, not from thermal coal. US consumption of central Appalachian coal for power generation has fallen 20 percent this year compared with the equivalent period of 2016, according to Peabody. Consumption of coal from the Powder River Basin, meanwhile, has risen 8 percent. As a result Peabody, which produces about 80 percent of its US coal from the Powder River Basin and also has a large business in Australia, is on course to resume paying a dividend next year, in spite of a generally challenging outlook for the industry.

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