The North American coal industry remains negatively positioned for 2016 with thermal coal facing a slow, long-term decline and metallurgical coal prices unlikely to recover within the next 12 months, a Moody's Investors Service note said Wednesday.
US and Canadian met coal producers are challenged by slowing steel production rates, mostly in China, along with global steel overcapacity, while the US thermal coal industry is struggling against low natural gas prices and regulatory-driven coal plant retirements, Moody's said in its 2016 Outlook.
"Environmental regulations will pressure domestic coal consumption for the foreseeable future as new capacity investment is directed toward natural gas and renewables," the New York City-based firm said.
Total US coal consumption is expected to reach an estimated 826.6 million st in 2015, down 9.9% from 2014. In 2016, total consumption is estimated to rise slightly to 830.3 million st, according to data released Tuesday by the US Energy Information Administration.
Production is projected to total 902.7 million st, down 9.7% to the lowest levels since 1986, the EIA said.
Moody's rated six companies negative, with near-term stress or risk to the downside: Arch Coal, Cloud Peak Energy, Consol Energy, Foresight Energy, Murray Energy and Peabody Energy.
It rated Armstrong Coal, Bowie Resource Partners and Westmoreland Coal as stable.
No companies were listed as improving or strong in the Moody's report.
Met coal markets also are unlikely to recover over the next 12 months as Chinese steel consumption continues to weaken and more met coal demand is being met by domestic suppliers.
Platts assessed premium low-vol FOB Australia spot prices at $75/mt Wednesday, down 32.6% from a year ago.
High-quality met coal benchmark prices are unlikely to recover over the next 12 months, Moody's said.
Overall, the industry's outlook is negative with cumulative EBITDA projected to decline by as much as 10% in 2016, Moody's said.
