Coal’s house is on fire, and the owners are looking for the exits.
Companies across multiple industries have been abandoning coal for years, a transition accelerated by the pandemic. What’s different now is the pace at which coal companies themselves, many with few other options, are attempting to leave coal behind, says Clark Williams-Derry, an energy finance analyst with the Institute for Energy Economics and Financial Analysis.
By 2015, more than 220 organizations had divested from coal, many of them philanthropic or non-profit institutions. But the exodus spread to industry around 2017, when mining firm Consol shed its thermal coal assets to keep its oil and gas business from being dragged down. The coal spinoff, Consol Energy, has lost about 90% of its value since 2018. Last year, global mining giant BHP followed the lead of rival Rio Tinto (which divested from thermal coal in 2018), beginning the process of selling off its coal assets.
The more coal’s prospects dim, the harder it is to get out. In 2019, America’s two largest coal-mining companies sought to join forces in Wyoming’s Southern Powder River Basin, home to major coal fields supplying America’s power plants. Both companies—Arch Resources and Peabody Energy—were looking to save money by consolidating operations even as they wind down due to competition from natural gas, as well as increasingly cheap wind and solar energy.
“The electricity markets force head-to-head competition between fuels,” Arch Coal stated in court filings this March. “Coal…is losing that competition at an unprecedented pace.” CEO Paul Lang argued Arch would have to shrink operations and closures as a way to save off further losses amid a shrinking market, according to S&P Global.
But this week, a judge upheld the Federal Trade Commission’s effort to block the $820 million tie-up on anti-competitive grounds. While the two companies sought to portray the market as one in which coal was primarily competing against other fuels, the ruling held that “meaningful competition” remained in the basin. Allowing the joint venture would risk monopolistic pricing on coal, harming American electricity ratepayers.
Both companies have now abandoned the transaction. Instead, Lang said in a statement this week that Arch would look for ways to dump its thermal coal assets by “intensifying our pursuit of strategic alternatives for our thermal assets.” Arch, like others, is refocusing from thermal coal (for power plants) to metallurgical coal for steel-making.
Two more mining firms, Trafigura and Glencore, also announced yesterday that they’re in a “managed transition” away from coal. Glencore’s chairman Tony Hayward told a commodities conference on Sept. 29 that firms invested in fossil fuels face a choice between managed decline, selling off assets, or finding a new business.
What’s the next business? Electric cars. “We’re not going to sell our coal assets,” Hayward said, “but will reinvest cash coming out of the coal business to grow the base metals business to meet what we believe will be very significant new demand in those metals over the next 10 or 25 years as the world seeks to electrify.” Perhaps your future EV will be supplied by a former coal company.
Correction: Paul Lang is an executive of Arch Resources, not Peabody Energy.