U.S. coal industry
At 258 billion short tons, the U.S. holds the world’s largest estimated recoverable coal reserves which can last for over 200 years based on current production levels. Although 25 states across three regions—Western, interiors, and Appalachian—produce coal, five states—Wyoming, West Virginia, Kentucky, Pennsylvania, and Illinois—account for over 70% of production. U.S. mines produced 983 million short tons of coal in 2013—the lowest output level observed since 1993.
U.S. mines produce two types of coal. Steam coal, or non-coking coal, and metallurgical coal, or coking coal. Steam coal is used to fire power plants to produce electricity while metallurgical coal is used primarily in steel making. Electricity generation accounts for over 90% of coal consumption in the U.S. Coal fired power plants generated 39% of the total electricity generated in 2013.
The U.S. produces surplus coal and exports it to other countries. In 2013, the U.S. exported 118 million short tons of coal to countries across the globe including the UK—13.5 million, the Netherlands—12.7 million, Brazil—8.6 million, and China—8.2 million. The exports included 66 million tons of metallurgical coal and 52 million short tons of steam coal. The consumers of steam coal are primarily the western European countries. Emerging countries like Brazil, Mexico, and China import metallurgical coal from the U.S. to make steel for their growing infrastructure needs.
The U.S. also imports a small volume of coal from other countries. The southern states of Alabama and Florida as well as Commonwealth of Puerto Rico find it more economical to import coal from Columbia than to procure it domestically. It’s more economical due to the freight costs involved in transportation of coal.
The top five coal producers in the U.S. include Peabody Energy (BTU), Arch Coal (ACI), Alpha Natural Resources (ANR), Cloud Peak Energy (CLD), and Consol Energy. The Market Vectors Coal ETF (KOL) invests in coal companies across the world and includes Consol Energy and Peabody Energy under its top ten holdings. For a brief overview of each of these companies, continue reading the next section in this series.
© 2013 Market Realist, Inc.
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