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Elad Jelasko, Standard & Poor’s credit analyst: "The current structural changes in the thermal coal industry are not uniquely linked to climate change regulation, but result from the emergence of alternative cheaper energy in the U.S. Over the past two years, the price of thermal coal in the seaborne market has been steadily declining--to $75 per ton at present from $105 per ton in early 2012--which is putting pressure on a large part of the industry."
James Leaton, Research Director at the Carbon Tracker Initiative: "It is clear that already in today's market, the economics of exporting U.S. coal do not add up. Investors need to understand where we will see this kind of structural change in the coal market next"
This latest piece of research from Standard & Poors’ coal analysts in collaboration with CTI explores for the first time the implications of reduced demand for the debt ratings of the coal industry.
Recent announcements on carbon regulation in the U.S. and attempts to curb pollution in China are likely to slow the pace of coal demand. As governments globally seek to reduce their CO2 emissions, it looks increasingly likely that “King” coal will lose its crown.
In 2014, prices for seaborne thermal coal have dropped to $75 per ton from $80 per ton on average in 2013. S&P conclude that at the current price level, exports from the U.S. remain largely unprofitable.
The research indicates some companies and regions are better positioned for the energy transition than others and demonstrates the need for greater integration of demand risk in assessing the creditworthiness of the coal sector.