The price of coal has exploded this year as worldwide demand has surged, but mining operations in the United States are struggling to keep up.
The price of central Appalachia coal averaged $73.25 per short ton, according to the U.S. Energy Information Administration’s most recent report. That is an increase of $2.20 from the week before, $7.45 from a month ago, and a 35% increase from earlier this year. Likewise, Australia’s Newcastle thermal coal, a global benchmark, is trading three times higher than at the end of 2019 at more than $200 per metric ton.
Several factors are driving up the price of coal, including supply-chain disruptions, burgeoning post-pandemic demand, and high natural gas prices. While the demand for coal declined in 2020 during the pandemic, as people stayed indoors and businesses closed up shop, newfound demand to travel and shop has driven breakneck economic growth and the need for energy.
The price of natural gas used to heat homes nationwide and produce electricity has skyrocketed over the past year, growing by about 180%. Europe is facing an even worse energy crunch as it struggles to buy up more natural gas after a colder-than-anticipated winter last year and a summer that was less windy than expected, meaning wind turbines didn’t generate as much natural energy as usual.
Traditionally, higher natural gas prices and demand have prompted gas-to-coal switching by utility companies as a circuit breaker. In the past, there were “no realistic constraints” for power generators to switch temporarily from gas to coal, according to B. Riley Securities analyst Lucas Pipes.
“We believe the situation is different today. Mining and generating capacity dropped by 40% over the past six years,” Pipes noted. He added that any price relief would come from international rather than domestic markets.
A big factor limiting U.S. mines' ability to meet the demand for coal is a shortage of miners and workers.
Ernie Thrasher, CEO and chief marketing officer of XCoal Energy, said several mining companies began curtailing investments to save money during the pandemic. Now that demand is back up, they are having trouble finding workers to increase coal output. The phenomenon is not just limited to coal mines. Other sectors are also grappling with labor shortages.
The number of coal miners is down 8.6% from before the pandemic, making it difficult to ramp up production, according to Bloomberg. Many miners laid off during the pandemic found employment in similar industries, such as automobile factories, and decided to stay put because the work was less demanding.
On the other hand, young people just getting their start in the workforce have also shunned the mining industry, which is increasingly depicted as a dying industry. Attempts to curtail the use of coal in favor of cleaner energy have also dimmed the prospects of mining jobs for those seeking a sustainable career path.
Mine operators are responding to the shortages by boosting wages and dangling perks to lure workers into entering or returning to the industry. Some companies are boosting wages more than 10% from pre-pandemic levels and are offering generous benefits packages.
One job advertisement posted this week seeks surface coal miners in southwest Pennsylvania. The job pays $17 per hour and includes a $1,500 signing bonus, paid vacation, and a four-day workweek.
Signing bonuses are most often associated with higher-paying jobs that require secondary education but are increasingly being tied to job applications for low- and middle-wage jobs, such as those for miners, as labor shortages persist.
“Everyone is scraping for employees,” said Rich Nolan, CEO of the National Mining Association. “They’re using every trick in the book to attract qualified workers.”
The transition to cleaner energy sources has intensified as lawmakers and their constituents fear the effects of climate change. A decade ago, fewer than 30% of U.S. adults said dealing with global climate change should be a top priority for the president and Congress. That number ballooned to 53% last year, according to the Pew Research Center.
Despite public opinion and initiatives to switch to cleaner forms of energy, the process is not quite so simple, said Thrasher of XCoal Energy. He noted that since World War II, some 80 years, the U.S. has had “a very reliable buildout of the electricity generating system in the grid.” Thrasher said that to change that in a five- or 10-year period is “physically unachievable.”
“It’s an aspiration and a goal that we should have, but it’s time for a dose of logic and reality,” he said. “Until we have some kind of economical form of storage, the grid has to be stable every second of every hour of every day.”
The high prices of coal and natural gas are leading some energy experts to fear what is in store for the coming months. The heating season begins at the start of October and runs through April. More energy, particularly natural gas, is consumed during those months as the weather gets colder and heaters get switched on. Some families will invariably feel sticker shock from the higher energy prices as they warm their homes.
Other goods and services have also increased in cost alongside energy prices. Inflation has been running hot. Annual inflation stood at 4.3% in August, according to the Federal Reserve's preferred metric — the highest rate in 30 years.
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Original Author: Zachary Halaschak
Original Location: Coal prices are soaring, but US industry too battered to capitalize