US coal production falls 3.4% in Q4 2023; more pressure coming in 2024

US coal production fell to 140.8 million short tons in the fourth quarter of 2023, down 3.4% from the same period in 2022, according to S&P Global Market Intelligence data.

However, average US coal mine employment held relatively steady in the period, nudging up by just under 1% year over year.

The decline of coal-fired electricity capacity has drastically reduced the sector's domestic customer base over the past decade. After waves of bankruptcy restructurings, the industry stabilized somewhat and turned its attention to metallurgical coal sold to steelmakers and other industrial users and also export markets for thermal coal.

US coal market prices have been declining despite weather-related upticks in prices for natural gas. The return of more competitively priced natural gas plus pressure from financial incentives for zero-carbon electricity will further pressure coal supplies, Steve Piper, director of energy research at Commodity Insights, wrote in a Feb. 7 report.

"Current flat forward pricing reflects both discounts needed to compete against natural gas and above-normal stockpiles," Piper wrote. "Declining coal demand and this year's inventory overhang will tend to restrain price growth in the medium term, although, in the western US, natural gas prices remain high enough to accommodate further appreciation in Powder River Basin coal prices."

Piper wrote that year-to-date coal production and year-to-date coal shipments indicate that the electricity sector burned about 414 million short tons (MMst) of coal in 2023, down from 475 MMst in 2022. Increasing pressure from natural gas could push burn down further to 398 MMst.

"For the four weeks ending Jan. 27, coal shipments averaged just 9.5 MMst, 20.1% lower than at this time last year," Piper wrote. "While cold weather may have caused some rail bottlenecks, this substantial decline from the prior January suggests coal stockpiles near maximum levels and reduced shipments until surpluses are worked off."

In recent earnings calls, US coal executives have pointed to a potential slowdown in the pace of domestic coal plant retirements over reliability concerns as well as the potential for new technology such as artificial intelligence and electric vehicles to boost electricity demand enough to add support to coal.

EXPLORE FURTHER: Download a spreadsheet showing mine-level production data.

Coal production is forecast to fall 19% in 2024 and a further 3% in 2025, according to the latest short-term forecast from the US Energy Information Administration. The EIA expects exports to continue to make up a larger share of the customer base for US coal miners, although export shipments are expected to fall 7% to 95 MMst in 2024.

– Read S&P Global Commodity Insights' latest coal report. – Learn more about US coal production, exports and additional information on the coal commodity profile.

Coal production and coal employment trends do not always track each other. For example, metallurgical coal is mined primarily in the eastern US and requires far more employee hours per ton than the thermal coal mined in the western US. Therefore, large production shifts in the western US can have a relatively small impact on industry employment, while a flurry of hiring to increase higher-margin metallurgical coal production could produce a relatively small impact on overall production volumes.

Fourth-quarter 2023 coal volumes from Powder River Basin mines, located in Wyoming and Colorado, fell 2.0% year over year, and average coal mining employment dropped 5.5%. The region produces coal used by power generators around the country, but higher inventories and competitive natural gas prices have constrained demand at existing power plants, while many more have been retired.

Coal production in the major eastern US coal basins also fell in the most recent fourth quarter compared with the prior-year period. Volumes from Northern Appalachia, Central Appalachia and the Illinois Basin fell 3.5%, 2.9% and 6.9%, respectively. Conversely, employment rose 1.1%, 4.1% and 2.0%, respectively, across Northern Appalachia, Central Appalachia and the Illinois Basin.