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US Coal Industry: An Industry Without Strategy

Updated: Nov 8, 2019

While the President of the United States is still denying “Climate Change”, steps out of Paris Agreement and wants to stimulate growth in the coal mining industry, America's coal companies slide into insolvency by the dozen – some advice: some people should first ask a strategy advisor, before making any decisions or announcements.

The death of the US coal industry continues: Murray Energy is now the largest coal company in the USA and the eighth to go bankrupt in twelve months. Even President Trump cannot stop the decline with his speeches. The market is playing against him.

Murray Energy, founded and run by Robert Murray, filed for bankruptcy on Tuesday morning. In the USA this is simply called "Chapter 11". The largest coal company in the country can no longer pay 1.7 billion US dollars in debt. It is a decline with announcement for many years and truly not singular.

The slow farewell of the coal industry

In the past 12 months, eight coal companies have slipped into insolvency. The labour- and cost-intensive coal mining cannot compete with the large-scale fracking gas available, which is produced more cheaply and used more flexibly in power plants. In addition, large energy suppliers are increasingly relying on wind farms and solar power plants, which in many places are cheaper than letting old coal piles continue to run.

The first large coal-fired power plants already closed years ago, despite the numerous relief measures for mining companies and power plant operators. US President Donald Trump reversed the environmental laws of his predecessor Barack Obama: for example, he repealed a water protection directive for coal miners, cancelled the Clean Power Plan and also withdrew from the Paris Climate Agreement under pressure from the coal industry.

Coal is no longer economically viable. And that was already apparent 4 years ago. Because the upheaval in the American energy market has long been of an economic nature.

Last year the New York Times calculated that of 580 coal-fired power plants in 2010, only 350 were still active in 2018. If ten years ago coal supplied almost 50 percent of the electricity, it was just 28 percent, by 2020 it could only be 22 percent. US coal consumption reached its lowest level in 39 years - and will continue to fall.

Now a lot of US employees will lose their jobs and to find new jobs on short notice will be difficult.

Could this have been avoided?

We think, yes. If you look at the long-term forecasts for the usage of coal or at the remaining raw oil reserves you will see that consumption of both will decline within the next 15 years significantly. Every company and manager who is working in this market today, needs to start transforming his business today by investing into new markets in order to create the profit of the future. Just doing the same as yesterday is not an option and honestly said, their shareholders and employees deserve better.

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