Hot Summer Temperatures Boost Coal Demand

Aug 1, 2016

A shovel loads a haul truck at Cloud Peak Energy's Antelope mine in this file photo from June 2, 2016.
Credit Stephanie Joyce

Record heat in much of the country is good news for the struggling coal industry. 

Hotter temperatures mean more people running their air conditioning, which in turn means more power plants burning more coal. 

“The hot start to summer has greatly improved the outlook, after a very slow first half [of the year],” said Colin Marshall, CEO of Cloud Peak Energy, one of the nation’s biggest coal producers, on an earnings call with investors. 

But while hotter temperatures may bring back some demand for coal in the short-term, it is unlikely to ever rebound to where it was just a few years ago because of plant closures across the county. Marshall said several of the company's customers canceled contracts in the second quarter because they were shutting down permanently. 

“So they will not be coming back, just as many other plants have closed. Which is one reason why, if you go back to 2011, we shipped 96 million tons, and now we’re looking at 60 [million tons],” Marshall said. “The reality is there is less coal being burnt in the US, and we’re adjusting to that.”

Cloud Peak is the only major coal miner in the Powder River Basin that has not declared bankruptcy. It has been downsizing though. Cloud Peak offered buyouts to 127 employees in the second quarter, and laid off 11 salaried workers.