Facing mounting pressure from the investment community due to environmental concerns, some U.S. coal companies bet their future prospects on exporting product overseas. But with few export opportunities before the pandemic and a global economic slowdown ripping into electricity and steel demand, it is unclear when the export market will become that panacea without nations enacting massive stimulus.

As U.S. coal miners face an existential threat from the coronavirus crisis, some are putting forward a hypothesis that demand for energy and steel will rebound as countries reopen and debate enacting infrastructure stimulus to revive their economies. Arch Resources Inc. took this position in mid-May, changing its name from Arch Coal and saying steel would be essential to the global recovery from the COVID-19 pandemic.

But there were diminishing opportunities for U.S. coal exports before the pandemic, and industry observers remain bearish on a potential boost in shipments. The U.S. Energy Information Administration recently predicted a substantial drop in exports for the rest of 2020 due to the global economic slowdown caused by national lockdowns and social distancing measures.

It is not clear the extent to which energy or infrastructure spending will be a factor in stimulus measures put forward by European or Asian nations or whether environmentally conscious politicians in those countries will support coal playing a role in recovery efforts. Nor is it assured that economies will rebound fast enough to allow exports to be a significant cushion for U.S. coal companies in 2020.

Moody's Investors Service on May 27 lowered its price sensitivity range for Newcastle thermal coal by 13% at the midpoint based on expectations that there will be a significant decline in electricity demand. Metallurgical coal prices have remained somewhat stronger because of the "expectation of stimulus," but there is not a lot of "room to move met coal prices up," Benjamin Nelson, Moody's senior creditor officer and lead coal analyst, told S&P Global Market Intelligence.

"We don't think that met coal exports are going to come down as much [as thermal coal], but they're going to come down," Nelson said May 27. "A lot of that stuff is just not profitable in the current market environment."

Sustainability-focused think tank Institute for Energy Economics and Financial Analysis recently predicted the U.S. coal market could be swallowed whole by negative market forces intensified by the pandemic, in part because export opportunities are "essentially constrained at current levels" for metallurgical and thermal coal. "There is money to be made through exports, particularly in metallurgical coal for steelmaking, but it is not a likely source of future growth," the group said in a March 30 report.

At the end of the first quarter, reflecting on results that largely excluded any impacts from COVID-19, coal executives discussed weakness in the export market and the damage done by the pandemic. Alliance Resource Partners LP CEO Joseph Craft said on a May 8 earnings call that prior to the pandemic, coal markets were already under pressure from a mild winter, persistently low gas prices, high utility stockpiles and "the continued absence of meaningful export opportunities."

Producers in the export-focused Illinois Basin were taking tons out of production in response to the crisis even if they had not said so publicly, Craft said, and Alliance's expected exports for the year were unchanged from projections made before the pandemic.

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Future quarters are nearly guaranteed to be worse than the first quarter, even for metallurgical coal exports. Contura Energy Inc. Senior Vice President Daniel Horn noted on a May 11 earnings call that coking plants in the U.S. and Europe are deferring volumes outside of the second and third quarters. Horn said the slowdown was "not a surprise at all," and the company is adjusting its production on the expectation that blast furnaces come back online later in the year.

Nelson said there are four ways U.S. coal exports could bounce back and become a source of growth for the sector: a rapid recovery in the global economy, massive stimulus spending including but not limited to China, a significant shutdown of metallurgical coal capacity, or a natural disaster decimating production in Australia or another major supplier. "If you don't see one of those things happen, it's hard to see met coal prices going up and staying meaningful," Nelson said.