Peabody files for bankruptcy as coal industry implodes

13 April 2016 8:48 pm

The coal industry is in decline. In the United States, coal plants generated 29 percent of US electricity, dropping from 39 per cent in 2014, as cheap natural gas establishes itself as the nation’s favourite power-plant fuel.

According to the International Energy Agency, global coal demand has stalled, largely reflecting economic restructuring in China, which represents half of global coal consumption.

As a result, the price of metallurgical coal has tumbled about 75 per cent since its 2011 peak.

And that’s having an impact on the industry and coal companies.

The big news story today is that the world’s biggest coal operator Peabody has filed for bankruptcy.

“The outlook for coal players remains bleak,” Sandra Chow, a Singapore-based credit analyst who tracks coal producers at CreditSights told Bloomberg. “Any recovery remains a long way from here.”

But this is all part of a pattern. Peabody is not Robinson Crusoe. Three other coal giants have declared bankruptcy within the last six months, ArchCoal, Patriot and Alpha Natural Resources.

The shift away from coal is expected to help countries move toward cleaner burning sources of electricity like natural gas, wind and solar. Natural gas releases fewer carbon emissions when it’s burned to make electricity than coal does.

The coal industry is heading downhill with the International Energy Agency forecasting it will plateau in four years time.

That should be a signal for government not to bankroll an industry going nowhere.