Both major types of coal — the coking coal used for making steel and the thermal coal burned in coal-fired electrical power plants — were included in Wood Mackenzie’s analysis. The estimate may be conservative, as the group excluded some costs incurred during mining, and focused primarily on the sharp drop in the price of coal.
Demand for thermal coal is also expected to slump further, in part because coal-fired power plants are expected to be required to meet increasingly strict standards for their emissions of toxic air pollution and greenhouse gasses.
And coking coal, which often sells for more than thermal coal, has been hard hit by the sudden downturn of China’s steel industry, which makes roughly half of the world’s steel.
A recovery for the steel industry may not come for years, analysts say. “It doesn’t help that Chinese steel production is about to see the most dramatic decline to the lowest in 20 years,” Herman Hildan, an Oslo-based analyst at Clarksons Platou Securities, told Bloomberg News about the steel industry’s prospects. “Demand growth is collapsing.”
Prices for some types of coking coal have already plunged more than 75 percent since 2011.
The Wood Mackenzie analysts concluded that now, “more than 65 per cent of world coal production operates at a loss.”
The situation is even more grim for some American coal mining regions, like Central Appalachia, where Wood Mackenzie concluded in March that 72 percent of the coal produced was being sold at a loss.
The firm does not expect a turnaround for the coal industry anytime soon.
“We’re bearish on 2016,” Matt Preston, who manages North American coal research at Wood Mackenzie, told The Billings Gazette.
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