In This Article:
The Zacks Coal industry stocks are suffering due to a decline in the use of coal in thermal power plants in the United States. In 2025, the demand for coal will be adversely impacted by the planned retirement of coal units and the utilization of more renewable sources for electricity generation. The ongoing energy transition, with utility operators steadily phasing out coal units, continues to hit the coal industry. Hence, the coal production volume is coming down. Coal export volumes in 2025 and 2026 are expected to drop due to a strong dollar. Despite a drop in coal production, SunCoke Energy SXC and Ramaco Resources, Inc. METC, with high-quality met coal production volumes, are expected to gain during this difficult phase.
About The Coal Industry
The Zacks Coal industry comprises companies involved in the discovery and mining of coal. Coal is mined through the open-cast or the underground method. The commodity is valued for its energy content and used worldwide to generate electricity and manufacture steel and cement. Per the U.S. Energy Information Administration (“EIA”) report, the current U.S. estimated recoverable coal reserves are about 252 billion short tons, of which about 58% is underground mineable coal. Given the current production rates, coal resources are likely to last many years. Five states in the United States contribute 70% of the yearly coal production and 60% of the coal production from surface mining. Per EIA, the demand for coal will decline due to the usage of more renewable assets and a gradual shutdown of coal-powered generation units, hurting the prospects of the coal industry.
3 Trends Likely to Impact the Coal Industry
Coal Industry to Experience Softness in Exports: Despite an expected drop in coal production volumes, coal operators in the United States benefited from the stable coal export volumes. However, EIA now projects total coal exports from the United States will be 93 million short tons (MMst), down 4.1% from the export volumes projected in March 2025. The drop in export volumes was due to the imposition of reciprocal tariffs on U.S. coal exports by China. The thermal coal export volumes are expected to drop to 47 MMst in 2026 from 49 MMst in 2025. Per the World Steel Association report, first-quarter steel production volumes were lower year-over-year. The imposition of tariffs by the U.S. administration can further reduce the demand for steel and lower the demand for met coal.
Despite Reliability, Emission Policy to Hurt Coal Industry: Coal is still a reliable source of energy and ensures 24/7 electricity production from the generation units. Yet, increasing emission concerns are resulting in reduced usage of coal in electricity generation. The United States’ Sustainability Plan includes an aim toward transitioning to 100% carbon pollution-free electricity by 2030 and achieving net-zero emissions by 2050. The growing use of natural gas and renewable energy sources, such as solar and wind, has greatly reduced the demand for coal. Natural gas has become increasingly cost-effective, largely due to advancements in fracking technology, while renewables have gained competitiveness through declining production costs and supportive government policies. Per EIA, the share of coal in U.S. electricity generation will drop from 16% in 2025 to 15% in 2026. Unless utility operators invest heavily in pollution-control measures to reduce emissions from power plants, domestic coal usage will continue to drop. Coal-fired units are gradually becoming backup units for utility operators in case of emergency power requirements.
U.S. Coal Production: Per EIA’s projection, coal production in the United States is expected to be 490 million short tons (MMst) in 2025, up from the previous projection of 480 MMst made in March 2025. The increase was due to higher production volumes in the Appalachia region and higher gas prices. Per EIA, coal production is expected to drop 4.5% year over year in 2025 and further drop 4.7% year over year in 2026. The coal operators continue to fight a losing battle against other cleaner sources of energy.