December 26, 2022
PITTSBURGH, PA – The Covid-19 pandemic’s beginnings in early 2020 caused hard times in the coal industry, including a sharp drop in demand that led to shut mines and layoffs across companies, including in Pennsylvania. But the energy crisis of 2021 and 2022 has helped get the industry back on its feet.
An International Energy Agency report earlier this month said that coal, which had dropped significantly in 2020 even after a decline in 2019, was likely to see high demand globally in the next two years. And IEA coal production, which has been falling sharply in the United States over the past 15 years, will likely finish up 2022 with its highest levels ever globally.
That’s a significant change to the report for 2020, which noted that coal-fired generation was on the wane in the United States even before the pandemic, and global coal consumption would fall even further after 2021. Global coal consumption, driven by China and India primarily, dropped 7% between 2018 and 2020, the highest percentage since IEA began keeping records in 1971.
But higher natural gas prices, along with a shortage in energy supply, has boosted coal demand and production for electricity and industrial purposes. Some coal-fired power plants, which were set to go offline, have remained open, including one in Armstrong County, one of the last remaining coal-fired power plants in Pennsylvania. IEA believes in its latest report that wind and solar will likely push coal further out after 2024 in the United States and Europe. But it’s also poised to increase in China and India. That’s not only for power generation, but also for industry in those countries.
“For most industrial purposes where coal is used, such as iron and steel production, there are not many technologies that can replace it in the short term,” IEA said. “Based on current trends, global coal demand is set to rise to 8.025 trillion tons in 2022, the highest level ever seen, and to remain there through 2024.”
That’s great news for the Pittsburgh-region coal producers that serve both the power plants and industry, like Consol Energy Inc. Consol (NYSE: CEIX) serves the domestic power plant market, but it also is increasingly producing coal for export to countries like India and shipping it via its own terminal in Baltimore.
It’s a turnaround for Consol, which had gone into survival mode with the rest of the industry, preserving cash and laying off employees at the Enlow Fork Mine in Greene County and postponing work on a new metallurgical coal mine in West Virginia.
Fast-forward more than two years and things have changed for the better at Consol. Consol’s third-quarter revenue was $533.6 million, and profit was $152.1 million, up 80% in revenue and 233% in profit year-over-year. It beat earnings per share and revenue amid climbing demand for coal and higher prices.
Perhaps even more telling is Consol’s stock price, which is up to $71.67 as of Dec. 23 — an increase of 233% in less than a year. Consol’s stock had been below $4 a share in October 2020. But the coal producer under CEO Jimmy Brock hasn’t just stabilized its ship, it’s paid off debt and has not only opened the mine it delayed in West Virginia, but also reopened Enlow Fork and should have a fifth longwall machine, used to produce coal in mass quantities, up and running by the end of the year.
Brock told the Business Times that coal continues to have a vital place in the energy mix.
“We need the continued productivity and predictability of cost-effective energy, much of which is currently provided by coal, while we develop truly cost-competitive alternatives on a global scale,” he said. “Coal is affordable, reliable, scalable and can be stored for emergency use. We need to use all available resources as fuel choices to meet different demand responses. Coal needs to remain a vital part of the energy mix for the foreseeable future.”
Consol and Brock have fought back against regulations, including Pennsylvania’s potential entry into the Regional Greenhouse Gas Initiative, that would place more demands on coal.
“The significant increase in energy prices stems from decades of underinvestment in traditional fossil fuels that still form the mainstay of meeting our energy demand,” Brock said in connection with the IEA report. “The underinvestment is resulting from regulatory hurdles and reduced financing access to traditional sources of energy. Unrealistic expectations around scalability of newer forms of energy that lack reliability and consistency at the expense of traditional energy are also a big driver.”