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U.S. coal exports decline in 2015 due to slower growth in world coal demand and lower international coal prices-EIA

The slower growth in world coal demand and lower international coal prices have contributed to a decline in U.S. coal exports in 2015. Lower mining costs, cheaper transportation costs, and favorable exchange rates will continue to provide an advantage to mines in other major coal-exporting countries compared with U.S, says EIA.

Coal Supply
Forecast U.S. coal production in 2015 declines by 97 million short tons (MMst) (10%).

According to EIA’s short-term energy outlook, forecast production decreases in all coal-producing regions, with the largest percentage decrease occurring in the Appalachian region (13%). Interior region production, which includes the Illinois Basin, declines by 8%, the first annual decline for that region since 2009. Western region production declines by 9%, dropping below 500 MMst for the first time since 1998.

EIA further noted in its short-term energy outlook that, the U.S. coal production is expected to decline by an additional 29 MMst (3%) in 2016. Interior region production, which accounted for 16% of coal production in 2011, accounts for 21% of production in 2016. This increase reflects the region's growing competitive advantages compared with the other coal-producing regions. These factors include the higher heat content of the coal, closer proximity to major markets than coal produced in the Western region, and lower mining costs than Appalachian-produced coal.

Electric power sector coal stockpiles were 162 MMst in September, a 4% increase from August, which is similar to the typical seasonal pattern. September coal inventories averaged 147 MMst during the previous 10 years (2005-14). Coal stockpiles are still relatively high because of the loss in market share to natural gas for power generation.

Coal Consumption
Forecast coal consumption decreases by 10% in 2015, mainly as a result of a 10% drop in electric power sector consumption, EIA commented on US coal consumption.

According to EIA’s short-term energy outlook which was released on 8 December, the Lower natural gas prices are the primary driver of the decrease in coal consumption. Low natural gas prices make it more economical to increase generation at natural gas-fired units and to decrease generation at coal units. Retirements of coal-fired power plants, stemming from both increased competition with natural gas generation and the implementation of the Mercury and Air Toxics Standards (MATS), also reduce coal-fired capacity in the power sector, but the full effect will not be evident until 2016.

Higher forecast natural gas prices in 2016 are expected to contribute to higher utilization rates among the remaining coal-fired power plants, which mitigates the effect of lower consumption because of coal-plant retirements. Coal consumption in the electric power sector is forecast to increase by 1% in 2016, as electricity demand rises and electricity generation from natural gas and nuclear decline, said EIA.

Coal Trade
EIA commented that, slower growth in world coal demand and lower international coal prices have contributed to a decline in U.S. coal exports. Lower mining costs, cheaper transportation costs, and favorable exchange rates will continue to provide an advantage to mines in other major coal-exporting countries compared with U.S. producers over the next few years. U.S. coal exports for the first nine months of 2015 were down 22% (16 MMst) compared with the same period in 2014. Forecast coal exports fall by 20 MMst (21%) to 77 MMst in 2015. The current global coal market trends are expected to continue, and coal exports are forecast to decline by an additional 6 MMst (8%) in 2016.

U.S. coal imports, which increased by 2 MMst in 2014 to more than 11 MMst, are expected to be largely unchanged in 2015 and 2016. Coal imports, primarily from Latin America, are forecast to maintain their market share with power generators along the Atlantic and Gulf coasts, as imported coal's delivered price in those markets remains competitive with prices for domestically produced coal.

Coal Prices
Commenting on coal prices within US, the EIA says, the annual average coal price to the electric power sector averaged $2.37/MMBtu in 2014.

EIA expects the delivered coal price to average $2.24/MMBtu in 2015 and 2016, the EIA’s short-term energy outlook concluded.

source: http://coalspot.com