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Moody’s changes coal industry outlook to negative as export prices weaken

Published by , Assistant Editor
World Coal,

Moody's expects coal sector EBITDA to decline more than 3% over the next 12 months.

Thermal coal export prices have dropped, while economic, environmental and social factors will continue to weigh on demand from utilities.

Moody's has lowered the outlook for the North American coal industry to negative from stable, the rating agency says in a new report.

"Coal producers' profitability will worsen significantly over the next 12 - 18 months, driven by a substantive decrease in export prices for thermal coal, particularly in Europe, combined with meaningful open contract positions for some producers in 2020," says Benjamin Nelson, a Moody's VP-Senior Credit Officer.

The combination of a now-weakened export market and significant retirement of coal-fired power plants in 2018 is creating an oversupplied domestic market and could drive prices lower, especially if natural gas prices remain very low and coal producers attempt to maintain production near current levels, adds Nelson.

The longer-term outlook for North American thermal coal is also increasingly stressed, as a confluence of economic, environmental and social factors weigh heavily on demand from utilities. Moody's projects thermal coal volumes to drop significantly over the next decade as utilities switch to natural gas and renewable energy, which continues to benefit from government subsidies.

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