Drop in coal prices forces Peabody bankruptcy

The world’s largest private coal mining company, Peabody Energy, filed for bankruptcy in mid-April after continuing falls in the price of coal clashed with its debt-fuelled expansion into Australia.

Peabody has a debt of $10bn, a significant proportion of which was accrued by acquiring Australia’s Macarthur Coal in 2011 – after which coal prices dropped and coal demand from China fell. The company blamed a weak Chinese economy as well as competition from shale gas and ‘regulatory challenges’ for the bankruptcy. It said its mines would continue operating while it reorganises its operations.

Peabody follows a number of other US coal producers going bust, most notably Arch Coal, the US’ second largest coal producer, earlier this year.

US coal production so far this year is 30% below the same period in 2015. This reflects a historic shift in both the coal industry and the electric power sector it serves, says the Institute for Energy Economics and Financial Analysis (IEEFA).

In addition to the on-going impact of low prices, bankruptcies and mine closures, 2015 year-end coal stockpiles at US coal-fired power plants were the highest in 25 years, according to the US’ Energy Information Administration (EIA). This is partly due to the warmest winter on record in the US leading to lower than average electricity demand.

US coal exports fell by 23% in 2015, the third consecutive year of declines, says IEEFA.

The US’ Clean Power Plan has the aim of lowering the use of coal for power generation and setting state-by-state limits on carbon emissions. The EIA says the plan as it stands would lower coal’s share of US electricity generation to 21% by 2030, from 33% today. The US Appeals Court was due to review the Clean Power Plan following a lawsuit from 27 US states this month, but the case has been pushed back till September. It is thought the final ruling will occur after the US elections in November.