U.S. coal production and employment took a nosedive in the second quarter as the COVID-19 pandemic delivered a significant blow to demand.

Average quarterly coal mine employment fell 13.3% from the prior quarter and 23.1% from the year-ago period to a new low in the second quarter of 2020, according to an S&P Global Market Intelligence analysis. At the same time, coal production declined to 112.3 million tons in the quarter, down 24.7% compared to the prior quarter and down 37.6% compared to the second quarter of 2019.

"I'm not sure how to characterize this quarter other than by saying, I'm sure we would all like to never repeat the experience of operating in this kind of an environment again," Ramaco Resources Inc. Executive Chairman Randall Atkins said on the metallurgical coal producer's Aug. 7 earnings call. "This quarter reflects only two months of economic activity for us, not three. We were essentially closed for much of the month of April, and that in itself is a condition, of course, we hope never to repeat."

Production and employment in the coal sector have been declining for several years. However, export demand had somewhat stabilized employment levels as mines in the eastern U.S., which generally require more workers per ton to mine higher-quality coal, were able to book sales outside of the declining domestic coal market.

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"From the time we took this company on the road, we said that we had the capability of pivoting from the export market to the domestic market and back again, better, more cost-effectively and more efficiently than anybody else in the business, and that has not changed," James McCaffrey, Consol Energy Inc.'s senior vice president of marketing, said on an Aug. 10 call with investors. "But what changed in the second quarter was, there was no place to pivot to. There was just no place to go."

Producers were already suffering in the first quarter with lower demand due to a warmer winter, diminished export opportunities and the ongoing retirement of the nation's aging coal fleet.

"Our concerns about competitive issues in the domestic coal market are increasing," Benjamin Nelson, senior credit officer and lead coal analyst at Moody's Investors Service, said in an Aug. 10 statement. "We believe that consolidation is necessary in an industry characterized by ongoing secular decline in demand combined with near-term erosion of financial strength driven by the adverse economic impact from global outbreaks of coronavirus."

The analysis of U.S. Mine Safety and Health Administration data showed that a drop in production and employment occurred across all major basins. The Powder River Basin saw production decline by about 13.4 million tons, or 21.5%, compared to the prior quarter. That is down about 30.1%, or 19.5 million tons, compared to the same quarter of 2019.

Peabody Energy Corp. CEO Glenn Kellow recently noted that the pandemic's impact on electricity demand has coupled with "extremely weak natural gas prices and growth in renewable generation" to further pressure coal demand and accelerate the secular decline in demand. In response, Peabody temporarily idled production at some lines, adjusted shift schedules, scaled back its workforce and reduced the number of units in operation.

"The overall weak demand, coupled with depressed pricing, has required us to continue to aggressively pursue our cost repositioning program," Kellow told investors Aug. 5. "To date, we've made significant progress — and we have needed to — yet, still more needs to be done."

The company's second-quarter results included a $1.42 billion asset impairment on its North Antelope Rochelle mine, the largest coal mine in the country.

"What seemed to be a slow-moving catastrophe not too long ago has gained momentum, and Peabody's huge write-down is a stark warning that coal mining's financial distress will continue," Institute for Energy Economics and Financial Analysis data analyst Seth Feaster wrote in an Aug. 6 news release.

Coal production from Northern Appalachia fell about 28.2% between the first and second quarters. In the same period, coal companies trimmed their workforce in the region by about 12.2%.

Contura Energy Inc. recently said it was accelerating plans to close one of its large Northern Appalachia thermal coal mines and exit the thermal coal sector. Contura CEO David Stetson said on an Aug. 7 earnings call that the economy is transitioning away from fossil fuels for power generation and Contura is adjusting.

"While we would welcome any improved pricing structure over the coming weeks or months, we believe it is wise to continue preparing as though the depressed pricing environment we've been experiencing will continue," Stetson said. "Even with welcome improvements that may come, we still expect the back half of 2020 to be challenging."

Central Appalachia saw production volumes decline about 31.4% quarter to quarter, while employment in the region decreased 18.5%.

Illinois Basin coal producers mined about 27.2% less coal in the second quarter compared to the prior quarter. The average coal mining employment in the region declined 19.6% over the period.