American coal has new playbook to dig itself out

Boosted by higher prices and presidential promises of aid, U.S. coal is having a comeback season. Yet a looming quandary remains for Peabody Energy, Arch Coal and other big American coal companies: Demand continues to shrink.

In the boom-bust cycles of old, the fuel’s use grew relentlessly as a fleet of coal-fired power plants fed America’s hunger for electricity. Now, a new age of clean, cheap natural gas and renewables has emerged, thanks to the shale boom and fears of global warming.

In the past decade, six major suppliers have gone bankrupt, some more than once. Now, some producers say they’re remaking their playbooks to survive in a dwindling market. High rates of return and credit ratings are seen as more key to the future than boosting production.

Over the last six months, the U.S. industry has gained as China, the world’s largest producer and consumer of coal, curbed its own production. That drove spot prices of metallurgical coal used in steelmaking to nearly triple last year to $226 per metric ton, according to The Steel Index. While prices have since eased back to $168.40 as of Tuesday, they’re still twice as high as a year earlier.

At the same time, campaign vows by President Donald Trump to roll back regulations and bring back mining jobs raised the struggling industry’s profile and outlook as it entered 2017. Last week, Republicans voted to kill a rule aimed at protecting streams from the effects of coal mining. Trump, meanwhile, has targeted the biggest environmental rules issued under former President Barack Obama, including the landmark Clean Power Plan.

The result: Equity capital markets are once again paying attention.

Read more: Bloomberg


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