- Moody's Investors Service on Wednesday downgraded the North American coal sector to a "negative" outlook, citing an expected 3% decline in earnings in the second half of 2019 and a slide in profitability over the next year to 18 months.
- The ratings firm pointed to a "substantive decrease in export prices" for thermal coal, particularly in Europe, combined with a likely struggle for producers to find buyers in 2020.
- The downgrade is a shift from July, when Moody's said the outlook remained "stable" despite declines in coal-fired generation. The firm predicted at the time coal-fired power could decline to just 11% of the United States' electricity by 2030.
Coal generated more than a quarter of the United States' electricity last year, according to the U.S. Energy Information Administration, but the fuel is in rapid decline.
"A confluence of economic, environmental and social factors also increase our concerns about the industry's longer-term demand prospects, as pressure on the industry is mounting," Moody's said in its note. That will make "numerous coal mines uneconomic in a reduced demand environment, especially smaller, higher cost mines that are highly vulnerable to retirement of specific coal-fired power plants."
Moody's said its long-term outlook for U.S. thermal coal "calls for a substantial volume reduction over the next decade driven by utilities switching to natural gas and renewable energy."
Coal producers are well contracted through 2019, the firm said, "but many have substantial open positions beyond that."
Just a decade ago, coal made up about half of the United States' electric generation.
In April, EIA announced renewable energy resources, including hydroelectricity, were on pace to generate more electricity than coal-fired plants for the month. That was a first, according to the Institute for Energy Economics & Financial Analysis. While there were seasonal factors at play, the group said it represented "signs of a tipping point" in the country's generation mix.
EIA expects all renewables will produce 18% of U.S. electricity in 2019, and almost 20% in 2020.