Moody’s sees substantive weakness ahead for North American coal

Carl Surran Aug. 21, 2019 6:57 PM ET

Moody’s cuts its 12-18 month outlook for the North American coal industry (NYSEARCA:KOL) to Negative from Stable, citing declining profitability, weakening export prices and declining demand from utilities over the next decade.

“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,” Moody’s writes.

The firm sees sector EBITDA falling by more than 3% over the next 12 months, driven by a substantive decrease in thermal coal export prices – particularly in Europe amid strict environmental measures – as well as mostly open contract positions for producers.

Moody’s says the U.S. coal sector could suffer a substantial volume reduction for the next decade, as a combination of economic, environmental and social factors continue to push utilities towards renewable energy.

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