Peabody Cuts 235 Jobs as Coal Demand Drops Further in 2016
Peabody Energy Corporation BTU to cope with challenging coal market conditions has taken the hard step to cut 235 jobs at its North Antelope Rochelle Mine in the Powder River Basin. The coal industry is going through extremely trying times with a few big players in the space even filing for bankruptcy in the wake of falling demand and cascading prices.
Coal which was the major fuel source for generation of electricity in the U.S. is gradually going out of favor. This is because of stringent emission control rules (coal-fired utilities being the primary contributor to greenhouse gases) and increasing use of cheaper and clean burning natural gas and alternate energy sources.
Per the U.S. Energy Information Administration (“EIA”), coal production in the U.S. is projected to fall by 111 Millions of Short tons (MMst) or 12% year over year in 2016. Per an EIA report, coal consumption in the electric power sector is forecast to decline by 29 MMst (4%) in 2016 as a result of mild winter weather and continuing competition from natural gas generation. In addition, coal exports are expected to decline by 13% year over year in 2016 as lower mining costs, cheaper transportation costs, and favorable exchange rates are expected to benefit other international operators.
Coal miners are trying to offset the challenges by reducing operating costs, lowering production levels, idling mines, selling non-core assets and finally cutting down on employee count.
Recently, coal and natural gas operator, CONSOL Energy Inc. CNX announced that it will sell its Buchanan Mine in southwestern Virginia and certain other metallurgical coal reserves to Coronado IV LLC for $420 million. The company also took the hard decision of suspending its dividend to counter weak coaI. In addition, miners like Peabody and Natural Resource Partners LP NRP resorted to reverse stock split to keep their stocks listed on the exchange.
Peabody Energy currently has a Zacks Rank #3 (Hold). A better-ranked stock in the space is SunCoke Energy Inc. SXC, sporting a Zacks Rank #1(Strong Buy).
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