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The US EIA: Short-term energy outlook on coal

The US Energy Information Agency (EIA) has reported a forecast on US coal exports, supply, consumption and prices.

The EIA projects lower domestic coal consumption and exports as well as a slight rise in coal imports will add to a 86 million short t (9%) decline in production in 2015. Coal production is expected to decline in all coal-producing regions in 2015, with the largest decline (on a percentage basis) occurring in the Appalachian region.

According to the report, a decline in coal exports in the US is largely a result of slowing global coal demand, a decline in international coal prices and increased outputs in other coal-exporting countries. Lower mining costs, cheaper transportation costs and better exchange rates in other countries have also contributed to hindering US coal producers.

The report indicated that coal exports for 1H15 fell by 20% compared to 1H14 and US thermal coal declined by 21% (4.1 million short t). The EIA anticipates coal exports will decrease by 18 million short t to 80 million short t in 2015, and then decrease by another 7 million short t (9%) in 2016. US coal imports, which increased by over 2 million short t in 2014 to 11 million short t, are expected to average close to that level in 2015 and 2016.

The EIA attributes lower natural gas prices to be a major cause of falling coal consumption. It expects a 7% decrease in total coal consumption in 2015 with the electric power sector consumption also declining by 7%. The closing of coal-fired power plants due implementing the Mercury and Air Toxics Standards (MATS) has also reduced coal-fired capacity in the power sector in 2015. The report indicates that these retirements are still ongoing throughout 2015 and therefore the full effect on production will be clear in 2016.

Despite continual implementation of MAT, coal consumption in the electric power sector is forecast to increase by 1.5% in 2016. Rising demand for electricity and potential increase in natural gas prices projected to lead to higher ultilisation rates in the remaining coal-fired power plants. Yet an anticipated growth in renewables could stop this return of coal-fired generation in 2016. For example, nonhydropower renewable-based electricity generation is expected to grow by 12% in 2016.

The EIA reported the annual average coal price to the electric power sector increased by US$0.02/million Btu from US$2.34/million Btu in 2013 to US$2.36/million Btu in 2014 but anticipates the delivered coal price to average at US$2.27/million Btu in both 2015 and 2016.

source: http://www.worldcoal.com