Coal Production Report Predicts Downturn in the Industry

Aug 16, 2018

A new economic forecast shows the recent uptick in coal production is expected to level out during the next two years and decline precipitously during the next two decades.

The annual coal production report, released today by West Virginia University’s Bureau of Business and Economic Research, shows the recent uptick in coal production will be short-lived.

The last few years have been a bright spot for West Virginia coal. Production has increased nearly 27 percent since the middle of 2016, driven largely by an uptick in coal exports to places like India, Brazil and Ukraine.

By contrast, the report forecasts a 3 percent drop in coal production during the next two years, with production leveling out around 85 million tons of coal mined by 2020.

“Weakening export activity will likely drive most of the anticipated drop in production through 2020, but the retirement and/or conversion of several gigawatts worth of coal-fired generating capacity that sources coal from West Virginia mines will also account for some of this decline,” the report states.

Coal production in both the northern and southern parts of the state will be affected. But northern West Virginia, which largely produces thermal coal for use by U.S. power plants, will be hit harder.

“Southern West Virginia’s production should be buoyed to some extent by export demand, but output is expected to trend lower during the outlook as a growing portion of the region’s reserves become too expensive to recover,” Brian Lego, co-author of the study and a research assistant professor at WVU, said in a press release.

From 2020 through 2040, the analysts expect production to continue to drop, hitting 66 million tons by 2040, a 17 percent decline from 2016.

The report also modeled how a $15 tax per ton of carbon dioxide would affect coal production across the state. The authors found a carbon tax would decrease production by an additional 23 million tons of coal by 2040, bringing production to 43 million tons, or a little more than half of what was produced in 2016.

In addition, the report analyzed the impact of both high and low demand from international export markets.

“For example, higher-than-expected global demand for coal would cause mined tonnage to remain around 90 million short tons through 2030 before falling to 79 million tons by the end of the (next) decade,” the study stated. “In an environment of appreciably weaker export demand, whether due to more aggressive reductions in coal use or some other underlying cause, production would plunge to 65 million short tons by the mid-2020s and roughly 53 million short tons by 2040.”