Despite promises to revive the US coal mining industry, analysts are saying that the country’s policy actions are not enough to reverse the trend of declining coal demand from the power generation industry.

In 2018, US coal production fell to 755-million short tons – a 20-million short ton decline on the previous year and 36% less than in the previous decade. The Energy Information Administration states that only two of the five major coal-producing regions reported higher output last year.

Although coal exports increased by about 10-million tons to 116-million tons, the volumes were not great enough to offset the lower domestic coal consumption from the power generation industry, which accounts for about 90% of total consumption.

US coal consumption fell to a 39-year low last year, as another 15 GW of coal-fired power generation capacity was retired and Moody’s Investors Service states that a further 5% of the country’s coal-fired generation capacity is expected to be decommissioned in the next four years.

“We do not believe that the export market, which should be near 100-million tons across all types in 2019, is large enough to soak up the anticipated decline in domestic demand on an indefinite basis,” the ratings agency says in a document, dated January 31.

Moody’s also notes that although coal producers should benefit from solid export prices in 2019, concern remains over the longer term sustainability of export volumes and margins, considering the high cost of US producers on a delivered basis.

“Given our assumption for ongoing volatility in export coal pricing, combined with our view that pricing is above mid-cycle levels today, we do not expect that producers will be able to sustain current cash margins indefinitely.”

Moody’s says that cash margins for US-based coal producers, which account for a small percentage of the global coal trade, will narrow as prices eventually retreat.