WVU business forecaster: Coal industry struggles haven’t hit bottom yet

MORGANTOWN, W.Va. — The recently completed coal production report from the Bureau of Business and Economic Research at WVU says the coal industry will spiral downward some more before it gets better.

The College of Business and Economics report says the industry has not yet hit the bottom.

“You’re seeing a bottom forming. We’re not necessarily there yet,” said Brian Lego, a forecaster with the WVU Bureau of Business and Economic Research. “I think within the next few quarters, at least if we see some stabilization or even a small increase in natural gas prices, we’ll see some competitive balance for coal’s return.”

If there’s one bright spot for the industry, Lego said, it’s that the global demand for coal has not completely diminished.

“It’s not the case everywhere that countries are countries are getting away from coal,” Lego explained. “Some countries are going to have to increase the use of coal over the long term just because their economies are growing; they’re still emerging economies like China, India, Turkey and even Germany.”

Many reasons have been given for the decline of coal, including environmental regulations of the Obama administration, a lack of demand, and low natural gas prices. Lego said it was a perfect storm of all three.

“What makes it really difficult for trying to tease out the actual impact of each, is with the regulatory environment, there was a big change that occurred almost simultaneously with the supply response for natural gas.”

The long-term forecast in the report shows a big difference between West Virginia’s  two coal production regions.

The southern coalfields will account for all of the downward trend in coal production, while production in northern West Virginia is expected to remain relatively stable, said the study.

The full report is available from the WVU Bureau of Business and Economic Research in PDF format.

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