Coal Getting Smoked Worldwide

September 29, 2015

Yesterday’s announcement that Shell was retreating from the Arctic and writing off 7 billion dollars in investments is just one of the symptoms of a wider fossil fuel swoon.

Politico:

A leading “clean coal” lobbying shop is cutting half its staff and reorganizing to reflect the U.S. coal industry’s market losses and the industry’s continued financial struggles.

The 22-year-old American Coalition for Clean Coal Electricity will lay off its chief of staff and also plans to eliminate several middle-management positions. The nonprofit is also seeking to get out of its lease for its downtown Washington office.

“Like many of our members, we are facing tough times that necessitate tough decisions on how best to effectively operate,” the group’s CEO, Michael Duncan, a former chairman of the Republican National Committee, said in a statement Monday morning to POLITICO.

Zerohedge.com:

The global commodity collapse is finally starting to take its toll on what China truly cares about: the employment of the tens of millions of currently employed and soon to be unemployed workers.

On Friday, in a move that would make even Hewlett-Packard’s Meg Whitman blush, Harbin-based Heilongjiang Longmay Mining Holding Group, or Longmay Group, the biggest met coal miner in northeast China which has been struggling to reduce massive losses in recent months as a result of the commodity collapse, just confirmed China’s “hard-landing” has arrived when it announced on its website it would cut 100,000 jobs or 40% of its entire 240,000-strong labor force.

Incidentally, far more than the Chinese stock bubble burst, or even the credit and housing bubble, the implications from mass defaults of coal companies are precisely what is keeping Beijing up at night.

As the WSJ reported in a piece earlier this week, “for decades, an army of migrant workers drove China’s boom times, flocking to its cities to sew T-shirts, assemble iPhones, or build apartment blocks and Olympic stadiums. The arrangement helped millions of poor, rural Chinese join a new consumer class, though many also paid a heavy price.

The paper of record adds:

 now, many migrant workers struggle to find their footing in a downshifting economy. As factories run out of money and construction projects turn idle across China, there has been a rise in the last thing Beijing wants to see: unrest.”

Because if there is one thing China’s politburo simply can not afford right now, is to layer public unrest and civil violence on top of an economy which is already in “hard-landing” move. Forget black – this would be the bloody swan that nobody could “possibly have seen coming.”

Bloomberg:

Now, like then, the principal problem is sinking coal prices. They’ve dropped 33 percent over the past four years to levels that have made most mining companies across the Appalachia mountain region unprofitable.

To make matters worse, there’s little chance of a quick rebound in prices. That’s because idling a mine to cut output and stem losses isn’t an option for many companies. The cost of doing so — even on a temporary basis — has become so prohibitive that it can put a miner out of business fast, Blackburn and other industry analysts say.

So companies keep pulling coal out of the ground, opting to take a small, steady loss rather than one big writedown, in the hope that prices will bounce back. That, of course, is only adding to the supply glut in the U.S., the world’s second-biggest producer, and driving prices down further. (sound familiar? – Peter)

It’s become, in essence, a trap for miners.

“You have this really perverse situation where they keep producing,” James Stevenson, director of North American thermal coal at IHS Inc. in Houston, said in a telephone interview. “You’re just shoveling coal into this market that’s oversupplied.”

3 Responses to “Coal Getting Smoked Worldwide”

  1. earlosatrun Says:

    How much debt does the coal industry have?

    Is it enough to bring down any of the major banks in the USA?

    • Lionel Smith Says:

      “Is it enough to bring down any of the major banks in the USA?”

      Pension funds in US and elsewhere could take a hit.

      Coal being smoked – as bad for your health as smoking Camels eh Joe B. To think my addiction to those helped his pension pot!


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