I spend so much time immersed in the minutiae of coal markets that I forget that most people—the normal ones, I mean—pay almost no attention to trends in the global coal industry.

There’s no shame in that, obviously. Still, based on conversations I had with friends and family over the holidays, it’s clear that lots of people have some serious misconceptions about coal exports. The folks with whom I chatted were gobsmacked to find out that global coal markets have been collapsing for five straight years, and that the prospects for US coal exports look gloomier than they’ve been in nearly a decade. For some reason, they had assumed that coal exports were still a thriving and lucrative business proposition.

Here are a few facts that bear repeating—and lots of links to evidence showing just how badly mistaken coal myths really are.

Fact #1: China’s coal consumption has been shrinking for years.

Many folks still believe that China has an unlimited appetite for coal and that the country’s industries and power plants would be delighted to buy any and all coal we send their way.

But in reality, China’s coal consumption peaked in 2013, fell by about 3 percent in 2014, and fell another 4 to 5 percent over the first 11 months of 2015. All told, China’s cutbacks have totaled some 300 million tons per year—the equivalent of one-third of total coal output in the US, the world’s second largest coal producer. So while China still has a huge appetite for coal, the country has slimmed down impressively.

The story behind China’s shrinking appetite for coal is complex and multifaceted: a slowing economy, a gradual economic shift away from energy-intensive industries and towards consumer goods and services, growth in energy efficiency and renewable energy, and an ongoing air-quality catastrophe that’s prompted aggressive policy reactions by the Chinese government. There’s no indication that any of these trends will reverse themselves any time soon.

These declines have precipitated a financial bloodbath for China’s coal industry. Amid sweeping layoffs and mine closures, some Chinese mine laborers have been forced to wait for months for their paychecks to arrive. But despite these cutbacks, the country still has far more coal than it needs and recently announced plans to close 1,000 additional coal mines this year, while imposing a 3-year moratorium on new coal mines.

Fact #2: Exports from the Powder River Basin to Asia have been unprofitable since 2013.

Many folks seemed to believe that US coal companies can make money selling coal to Asia. But the truth is that most US coal exports to Asia stopped being profitable years ago.

Consider the case of Cloud Peak Energy, the best-positioned US coal exporter in the Powder River Basin, which stretches across vast swaths of southern Montana and northern Wyoming. As we’ve documented, Cloud Peak has been losing money on exports since the middle of 2013. Their only saving grace was that back when prices were high they used futures contracts to lock in profits. But as those futures contracts started to run out, the red ink started flowing faster and faster. Last fall the losses got so bad that Cloud Peak decided to halt all exports, even though it’s still contractually obligated to pay steep penalties to rail and port companies for not shipping coal.

For a brief period, starting in about 2010, coal prices were high enough that US companies could make money on exports. But prices started dropping in 2011 and have collapsed for nearly 5 straight years. And despite the hopes of coal industry execs, there’s no price rebound in sight. The futures market currently predicts that a key international coal price benchmark will keep falling for the next several years.

Fact #3: China is cutting imports from everywhere. The US is in the same boat as everyone else.

Some folks I chatted with seemed to believe that if the US cut its exports, other countries would simply pick up the slack. But in today’s international coal market, there are no winners, only losers: the entire seaborne coal market has seen shipments plummet and profits vanish. Australia’s coal mining sector is in a shambles, with massive job losses across the entire sector and coal boom towns turning into ghost towns. Indonesia’s exports are slumping, with a 17 percent decline anticipated for 2016 alone. Exports from British Columbia’s Ridley coal terminal have been in freefall, with further declines in the offing for 2016.

The big reason, again, is China. With domestic consumption falling, China has taken aggressive steps to protect its own coal industry from imports, both by levying coal import tariffs and by imposing quality controls on imports. At the same time, the country is channeling some industries inland, away from smog-choked coastal cities (and also away from import markets). It’s also forcing cutbacks in coal consumption in the coastal provinces, where imports are most competitive. The result: Chinese customs data shows that imports last November were down more than 50 percent from January 2014.

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  • Those cutbacks came from everywhere, not just the US. It’s just not true that “our pain is Australia’s gain,” or that China is getting its coal “from somewhere else.” The real story is that every coal exporter is getting hit—and the places that had built expensive infrastructure to feed China’s allegedly “bottomless” appetite for coal are getting hit worst of all.

    Fact #4: There’s absolutely nothing on the horizon that can replace the collapsing demand from China.

    About a year ago, as Chinese imports faltered, US exporters began to talk about the bright prospects for exports to South Korea. But the Chinese declines absolutely dwarf any other potential import gains in the rest of the Pacific Rim. Recall that China has nearly 1.4 billion residents; South Korea, just 50 million. In that context, the hopes that South Korean imports could counteract China’s decline seem preposterous.

    For a while it looked as if rising demand from India might start to replace some of the Chinese import cutbacks. But after years of rising imports, India’s coal minister has pledged to make the country self-sufficient in coal, ceasing all coal imports by 2017. Analysts at Bloomberg New Energy Finance consider that timetable overambitious, but still believe that India’s imports will sink and likely vanish by 2023. But the Indian government’s efforts to trim imports have already yielded success: the subcontinent notched a 15 percent year-over-year coal import decline from April through December 2015, with declines accelerating towards the end of the year.

    In short, there’s no realistic hope that some other country, or set of countries, will replace China’s lost demand. Instead, it’s likely that the seaborne coal market will sink even further as India’s coal imports ebb.

    Fact #5: The odds are that US coal producers will always be at a disadvantage to competitors in Asia and Australia.

    This seems to be a hard one for people to grasp. But under typical market circumstances, the US coal industry just can’t compete in Asian markets. Our coal is just too far away, and the transportation costs are too high.

    And it isn’t just me who’s saying this. Back in June 2012, when the coal bubble still had some air in it, coal industry analysts at Wood Mackenzie warned Northwest shippers that “Indonesian Coal enjoys a significant cost advantage” over even the best Powder River Basin coal. They cautioned that for US coal exporters, “Competition could be fierce, especially if Asian demand weakens and the market becomes periodically or permanently oversupplied.” Well, that’s exactly what’s happened: Asian demand weakened, the seaborne coal market is now oversupplied, and any hopes for profitable exports have gone up in smoke.

    The disappointing truth for US coal executives is that US coal exports to the Pacific Rim will only be profitable during those relatively rare periods when coal prices spike. And while prices have spiked from time to time, they’ve promptly come back down to earth, falling to a point where US exports just can’t compete. Coal executives mistook a temporary price bubble for the “the new normal” and convinced themselves, along with a lot of investors, that the US was well positioned to make money in Asia. They were dead wrong—demonstrating, perhaps, that coal executives don’t have to be smart or insightful to get rich.