Coal prices rise, but Appalachian boom unlikely
David Boyd, of Sulfur, Kentucky, is one of the few people who sell coal for household use. Think of heaters and blacksmiths. And after doing this for 62 years, he can tell the quality of each piece just by smelling them.
“See how fluid it is?” he says, picking up a piece that he says is high quality, “pure” oil. Then he finds a crumbling piece in his hands – which he says means it’s “kind of trash.”
Boyd says he sells a ton of coal (about the amount that could fit in the bed of a full-size pickup truck) for around $185. But with the recent changes in the coal market, he could sell it for a lot more.
A ton of coal was valued at about $85 last May. Now it’s worth almost four times as much, hovering around $320.
“So right now we have a mini coal boom,” Boyd said, watching a train pass by his house. “And everything goes by train.”
What Boyd means is that companies want to ship their coal overseas, on trains like the one that passes his house. Indeed, European countries that boycott Russian natural gas still need a reliable source of energy, says Bill Wolf, market analyst at mining consultancy John T. Boyd.
“If you don’t have the ability to rely on natural gas, especially if it’s supplied by Russia, they’re going to have to ramp up some of these coal-fired units,” Wolf said. “That’s why you’re seeing this very rapid increase in coal prices literally across the world.”
Wolf says it’s not just the Russian invasion of Ukraine. China – by far the largest coal consumer in the world – stopped buying coal from Australia in 2020 after the government requested an investigation into the origins of COVID-19. This has created an opportunity for new sellers to enter Chinese coal markets.
“Yeah, it’s probably an unprecedented situation,” Wolf said. “I hate to use that word ‘unprecedented’, but that kind of sums things up right now.”
In the traditional economy, strong demand usually means that suppliers increase production to take advantage of rising prices. But Erin Bates, communications director for United Mine Workers of America, says coal companies can’t meet demand with their current workforce.
“There just aren’t many experienced miners who want to come back to coal after being laid off for the past two years,” Bates said. “So it’s kind of an interesting dynamic.”
Without workers, coal in Appalachia isn’t going anywhere fast, Bates said. US Energy Information Administration Data shows that production in Kentucky is only up about 4% from the same time last year.
Bates says it’s also not economical for coal companies to ramp up coal production for what could be a temporary boom. Especially when, in the long term, people and businesses turn to green energy.
“Operators always find it too expensive to put machines back in there and have employees back in there,” Bates said. “Even though the price is so high. They just don’t see the value in it.
So what does all of this mean for your electricity bill? Hopefully very few.
Daniel Lowry, spokesman for Kentucky’s largest utility, Louisville Gas and Electric and Kentucky Utilities, said the electricity company buys its coal up to six years in advance.
“It helps reduce or postpone spot coal purchases,” Lowry said. “These purchases are really carrying these recent high prices.”
But Lowery notes that might not be true for other power companies without the same coal reserves and long-term contracts.
“So much of the country will see energy prices go up,” he said. “That’s the bad news for much of the country and the whole world.”
Even so, he warns, if coal prices remain high, the company could consider something like a 10% price increase for customers this winter.