2015 is shaping up to be a fateful year for the coal industry.

After coal prices tumbled from their highs in 2011, the industry hit a rough patch. Years of buildup in mining capacity hit the markets at the same time, sending prices crashing. By the beginning of 2014, things were looking pretty grim. But optimists hoped it would be merely temporary; a supply glut that would ease once demand picked up.

However, demand has not been nearly as strong as expected. The US has been moving away from coal for a few years now, with cheap natural gas, more renewables, and energy efficiency. Related: Can Cigarettes Beat Tesla At The Energy Storage Game?

China’s economic growth slowed a bit, but its efforts at reining air pollution have gone a long way at reducing coal demand. In fact, China may have already hit a peak in its coal consumption, which would be a shocking development considering the country was aiming to hit its peak no later than 2020.

With the world’s largest coal consumers trying to rid themselves of the dirty fuel, it appears that there is little room to maneuver for coal producers. The industry is in structural decline, and 2015 may be the year in which it all starts to fall apart.

China continues to ratchet down its coal use, achieving an 8 percent reduction in consumption between January and April of this year, over the same period in 2014.

In the US, 2015 will also be a dark one for coal. An estimated 13 gigawatts of coal-fired power plants are expected to be shuttered by December, as strict pollution controls kick in. The Mercury Air Toxic Standards (MATS) required plants to upgrade pollution controls.



For some, the costs of upgrading don’t make sense, so the only alternative is to shut down. Environmental groups like the Sierra Club have fast-tracked this dynamic, assaulting coal plant owners with legal challenges, a story nicely laid out in a Politico article by Michael Grunwald.

In many places across the US, renewable energy is now a cheaper option than coal. The pace of retirement will only accelerate in the coming years – pending regulations on carbon emissions would slash the number of coal plants by one-third by 2025. Related: Iraqi Oil Sector Shrugs Off ISIS Threat

To be sure, a lot of those plants are older, smaller, and are not run at full capacity, but they make up a huge loss for the coal industry. Fewer power plants burning coal means less demand for coal from miners.

But it gets worse. Not only is coal starting to lose the economic argument, but it is losing the moral one as well. In early May the Church of England announced that it would divest its assets from coal. And on May 27, the divestment campaign claimed an even larger victory in Norway.

Representing the world’s largest sovereign wealth fund – over $890 billion in assets – the Norwegian government came to an agreement to divest its holdings from coal companies. Having already announced that it would pull out from pure-play coal operators, the latest agreement would go farther. The agreement would block investment in any company that operates in multiple sectors, but receives more than 30 percent of its revenues from coal or in utilities that generate more than 30 percent of their electricity from coal. Related: Oil Still At Risk Of Geopolitical Turmoil

With much of the world quickly shifting away from coal, there are few avenues for coal mining companies to turn to. The US market was already shrinking, but with customers in Asia no longer hungry for coal, the clock is beginning to run out. Bankruptcies are starting to hit the US coal industry. Patriot Coal just filed for bankruptcy for the second time. Arch Coal, which accounts for 13 percent of the US coal supply, is reportedly in restructuring talks over its debt. And due to its share price falling well below $1 per share, Arch received notice from the New York Stock Exchange that it may be delisted.

More announcements like that one are almost certainly in the works. The coal industry has had a painful few years, but 2015 could be its worst yet.

By Nick Cunningham of Oilprice.com

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