More than half of the country’s coal mines are managed by pro-Russian separatist militia.

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Amid already challenging market conditions, in early 2019, historic floods caused by a so-called ‘bomb cyclone’ battered the Rockies with snow and the Midwest with rain, impeding Illinois-operating coal companies’ ability to move their product along the Mississippi river.

“Logistically the floods have taken a toll on miners and producers, particularly those trying to reach the export market,” says Ellie Potter, energy and mining reporter at S&P Global Market Intelligence.

Five months on, miners are still feeling the impacts of the floods, she says, with some having to reroute their usual course.

In July, the industry was shaken further by the death of Illinois’s “King of Coal” Christopher Cline, a billionaire coal tycoon and founder of Foresight Energy. Cline, who was well known for his efforts to revive Illinois’ mining industry, tragically died in a helicopter crash in the Bahamas along with his daughter.

Foresight Energy, which Cline founded in 2006 to manage his Illinois Basin coal rights, published losses in its last quarter earnings in August. The company highlighted one of the biggest challenges facing Illinois miners today - weakening demand due, in large part, to a flood of cheap natural gas in the market.

Gas now accounts for a third of the US’s energy mix, compared to around a quarter for coal. Renewables are also gaining traction, with the US Energy Information Administration (EIA) noting earlier in the year that renewable power had, for the first time ever, provided more power to the US grid than coal.

However, despite gas eating into coal’s market share, its proponents insist it is competitive with natural gas.

But while coal might often seem cheaper or on par with gas, its competitiveness depends on its location in the market, says Matt Preston, director for thermal coal at Wood Mackenzie.

“Illinois basin coal (ILB) is favoured with some of the lowest cost mines in the US; however, in southern Illinois for instance, ILB might be delivered to a nearby plant for about $1.82/mmbtu. In that same region natural gas might be $1.55/mmbtu (adjusted for the greater efficiency of a gas combined cycle) and powder river basin coal could be $1.87/mmbtu,” he explains.

“ILB would seem to be slightly more competitive but the cost of cleaning up the very high sulphur means firms will favour PRB as the most competitive, but still behind natural gas.”

Miners are now looking further afield to export markets, such as Asia and South America. Foresight Energy CEO Robert Moore said recently that export demand ‘remains strong’ and that it will continue to provide an ‘economical outlet’ for a significant portion of its 2019 production. It expects to export six million tons of its projected 21-22 million tons of coal.

But even the export market is proving challenging.

“The fact is, global economies have slowed while coal supply has been stable to increasing, and the surplus of coal supply is depressing international prices,” says Preston.

Potter says some producers have benefitted from an increase in exports to growth markets like India and South East Asia, because it has effectively reduced supply to the local market, which has been good for non-exporting companies. However, declining international prices mean this is likely to be short lived.

“Experts have told me they expect some of that tonnage may be returned to the domestic sector, which could lead to more competition in the Illinois basin and potentially depress prices domestically,” Potter says.

The challenging market conditions has seen mine closures and major miners in Illinois diversifying away from coal. Alliance Coal, which has seven mines in the region, has shifted some of its focus to oil and gas for example, and in August the company announced it would cease coal production at its Dotiki Mine. It cited ‘weak market conditions’ as the reason.

In early August, Peabody Indiana Services LLC announced the closure of its Somerville Mine, costing 120 jobs.

Given the mine closures, falling demand and weak market conditions experts think it likely there will be more consolidation in the market. Foresight Energy’s Morris earlier in the year said he expects this to happen.

However, as long as there is a market for coal there will “likely always be a place for ILB producers,” says Preston.

“In Florida, for example, ILB is the most competitive coal, even against natural gas,” he says.

Alliance President and CEO Joseph Craft has also said he believe there is adequate demand from utilities for “the tonnage we're bringing on”, adding that thermal exports “will grow another 10% or so overall, with most coming from the Illinois Basin.”

Furthermore, President Donald Trump, who 14 coal-producing counties in Illinois overwhelmingly voted for, has effectively killed former president Barack Obama’s Clean Power Plan (CPP), which would have been the final nail in the coffin for coal.

Trump has ‘stopped the bleeding’, says Phillip Gonet, president of the ICA, by repealing the CPP. However, he adds that while this is ‘helpful’ ‘it’s not going to bring back the coal plants that have shut down, but merely maintain the existing fleet.

Regardless, Preston says market forces are ‘doing the CPP’s job for it.’

“As it turned out, market forces i.e. low natural gas prices have achieved the same, or better, coal displacement than envisioned in the CPP,” says Preston.

However, he notes that if Trump’s Affordable Clean Energy (ACE) act becomes the governing regulation, coal could regain some market share if gas prices were to rise.

“There is also the possibility that the efficiency improvements envisioned in ACE compliance could result in very modest gains for coal burning generally,” he adds.

The Illinois coal industry is unlikely to see a renaissance but it remains stable - for now.

For coal’s longevity, Gonet doesn’t see renewables as a threat because the electricity storage it needs is ‘insanely expensive and years away’ and, he says, while natural gas prices are low, it often has problems with siting pipelines.

“Coal and nuclear are the only baseload sources that are resilient and resiliency is an important issue - and coal can compete per btu,” he says.

But he concedes it is unlikely the industry will ever reach the levels of demand it saw before and that consolidation and mine closures could happen across the country. But being positioned by the Mississippi river, Illinois coal has an advantage because it can be ‘transported almost anywhere’, he says, with exports making up around 25% of sales in recent years.

Preston, however, doesn’t share Gonet’s positivity. He says the coal industry could ‘eke out a relatively stable level at current volumes’, but overall the prospects for the industry at large are ‘not good’.

“Domestic demand will continue to be challenged by low natural gas prices and the steady incursion of renewables and technological solutions to lower CO₂ emissions from fossil plants are costly and years from becoming commercial. Furthermore, international markets are fickle with the US being typically the last-in, first-out coal choice,” Preston finishes.