US coal producers may face pressure to cut workers in 2024, since a drop in coal-fired generation and longer working hours late in the year have eaten into profits.
Powder River basin (PRB) producers are likely to continue trimming output into the beginning of 2024, three different coal companies told Argus. "The only caveat would be high natural gas prices, which seem unlikely," one producer said.
But even if demand declines, producers might need employees for mine reclamation, a coal buyer said. "So, we might not see these layoffs in the very near future."
Among US coal operations, PRB coal mines have the greatest chances of layoffs if demand continues to fall off, since nearly all of their output is sold domestically.
PRB mines were already showing some signs of scaling back in late 2022, a trend that continued in the first nine months of 2023. Basin output for January-September 2023 was 2.7pc lower than it had been in the same period of 2022. PRB mines employed 2pc fewer workers January-September, and miners' hours worked were also down by 2pc compared with a year earlier, US Mine Safety and Health Administration (MSHA) data show.
PRB coal companies typically have more flexibility to respond to demand fluctuations than mines in other parts of the US and are now scaling back more quickly than other basins' operations. Larger coal producers, such as Arch Resources and Peabody Energy, could transfer workers between mines. Arch for example, has shifted employment to its Black Thunder mine from Coal Creek as it gets closer to exhausting Coal Creek's reserves. The company is still producing "modest" volumes but roughly 90pc of operations at Coal Creek are closed, and the mine is "essentially fully reclaimed," Arch's chief operating officer John Drexler said at the end of October.
Producers may also be relying more heavily on contractors, which may mean mine employment is higher since contractor employment is not included in MSHA's mine-specific data, one coal producer suggested.
Eastern cuts ahead
More cuts may be in store for eastern US coal producers, some of which had support from export markets most of this year. Underground operations also tend to take longer to respond to fluctuations in demand than surface mines, which make up most of PRB's mines.
While seaborne thermal coal prices and demand supported eastern coal operations in 2022 and some of 2023, those fundamentals have weakened. And pressure on domestic demand continues, B Riley Securities managing director Lucas Pipes said.
Coal plant inventories are "fairly elevated," and natural gas prices are "still uninspiring," Pipes said. So, "for basin areas that are tethered mostly to the domestic market, one will likely see a slight negative" move in production and employment in the coming quarters.
US coal production slowed during the first nine months of 2023, dropping by 2.8pc from a year earlier to 436.6mn short tons (st) (396.1mn metric tonnes), figures from MSHA show. But employment at US coal mines and average quarterly hours of operation nationwide were up by 5pc and 3.2pc, respectively, in the first nine months of 2023.
Northern and Central Appalachian coal production, employment and average hours rose in the first half of 2023 but have since eased. Illinois basin production has been lagging year-earlier levels since the second quarter, according to MSHA, but employment and hours through the third quarter were still higher than in 2022.
While a handful of companies have planned job cuts, some market participants are expecting employment to hold somewhat steady in coming months.
One producer said it is still trying to hire additional workers and expects to ramp up output. The company had a number of coal solicitations in October. While the volumes of those solicitations are not at the levels consumers normally take, they are enough to support greater output.
More recent estimates from the US Energy Information Administration and the Labor Department suggest output fell by 4.4pc from a year earlier in October and by 7.2pc in November. Coal mine employment — while lower than the three-year high set in July — only started to trend below year-earlier levels in November. Average weekly hours worked at coal mines in October, the latest month for which the Labor Department has data, also was higher than it had been a year prior.
