The nature of coal production has altered the structure of this industry to achieve more consolidation and as a result, fewer companies have continued to dominate this sector. In the United States, the four largest players, including Peabody Energy Corporation (NYSE:BTU), Arch Coal Inc (NYSE:ACI), Alpha Natural Resources LLC and Cloud Peak Energy Inc. (NYSE:CLD), have controlled more than half of the coal supply in the country.

Figure 1: United States coal production share by top four coal companies

Coal
Source: Energy Information Administration (EIA)

The Energy Information Administration (EIA) reports that the four firms supplied a total of 575 million tonnes of coal in the US, accounting for 52 percent of total US production of coal. The remaining 48 percent was supplied by five hundred small firms dispersed across the country. “By comparison, the fifth largest coal producer in 2012, Consol Energy Company, contributed 34 million tons, or 35% less than fourth-place Cloud Peak Energy Inc. (NYSE:CLD),” said the EIA.

Figure 2: Total US coal production and top four coal producers’ share each year

Source: Energy Information Administration (EIA)
Source: Energy Information Administration (EIA)

The ranking of the companies has changed from year-to-year with marginal differences especially between the fourth and fifth rank. However, the share of total production held by the top four producers continues to grow over the years. This trend “began in the 1990s with the continued expansion of mines in the Powder River Basin in the western United States and with the divestment of coal properties by oil and gas companies. In 1990 and 1995, the top four accounted for 22% and 35%, respectively. By 2002, when total coal production levels were nearly identical to production in 2011, the top four coal producers accounted for 40% of the total U.S. production and increased to over 50% in 2011 and 2012, based on preliminary 2012 data,” quotes the EIA.

Figure 3: Top four US coal producers, 2000-2011

Source: Energy Information Administration (EIA)
Source: Energy Information Administration (EIA)

In 2011, the combined coal production of  the top four companies represented 27% of Appalachian production, 18% of interior production, and 77% of western production. “If measuring by the heat content of the coal produced, the top four coal producers’ share of production was about 49% (compared to the 52% share on a tonnage basis) in 2011 because of the lower heat content—measured in British thermal units (Btu)—of western coal sources. Even so, the top four producers on a Btu basis still include Peabody, Arch, Alpha, and Cloud Peak. These companies also maintain a high share of national production because of the decline in higher-Btu Appalachian coal’s share of production; in 2011, its share of total production (measured in tons) was 31%, compared to 39% in 2000,” the EIA testifies.

Figure 4: Regional production for top four US coal producers (million short tons)

Source: Energy Information Administration (EIA)
Source: Energy Information Administration (EIA)

The consolidation among energy firms over the past few years further allowed the top firms to grow their shares. The list of major industry movements and their implications is given in the table below.

Table 1: Mergers and acquisitions in the coal industry

Source: Energy Information Administration (EIA)
Source: Energy Information Administration (EIA)

The coal production is a concentrated business and is expected to remain such for the coming years. In fact, the trend of consolidation indicates that the number of players in the market will further shrink over the next decade until coal production becomes and oligopolistic industry.