Coal news and updates

Coal-fired generation in the US is likely on its way to a modest recovery in 2021, following the damaging impacts of the coronavirus pandemic, driven by a large jump in demand in the power sector expected as natural gas prices encourage gas-to-coal switching.

 

With Henry Hub natural gas expected to remain above $3/MMBtu for the first half of 2021, “Platts Analytics estimates that the US will see roughly 3 Bcf/d-3.5 Bcf/d of switching as dispatch economics favor coal over gas,” a 2020 Review and 2021 Outlook said Dec. 9.

The Energy Information Administration forecast a 2021 average Henry Hub spot price of $3.13/MMBtu, compared to its 2020 average of $2.15/MMBtu, in its December Short-Term Energy Outlook Dec. 18.

 

Additionally, gas-to-coal switching in the US is expected to drive the first year-on-year increase in coal demand since 2013, the International Energy Agency said in its December coal report.

 

The EIA forecasts power generation consumption to be 537 million st next year, up 23.3% from the projected 2020 total of 436 million st.

 

Coal-fired power generation’s share was also forecast to increase to 24% from 20% in 2021 in the STEO. Natural gas generation’s share, on the other hand, is projected to drop 5 percentage points to 34% in 2021.

 

“2021 could be coal’s ‘last hurrah’ of demand,” Platts Analytics said in the Dec. 9 report. While gas-to-coal switching and recovering power demand in the US will encourage coal demand, financially distressed US producers may be challenged to adequately ramp up supply.

 

Additionally, coal-fired capacity will continue to shrink. Based on current plans, the EIA projects the removal of about 2.7 GW in 2021, following the loss of about 9.4 GW in 2020.

 

Through 2021-2025, the EIA forecast that about 25.2 GW of coal-fired capacity will be removed.

 

Increased renewable generation share will also play a part. “In 2021, renewable energy sources will meet a larger share of the increase in electricity demand than coal,” the IEA said.

 

According to Platts Analytics, wind is expected to generate 10% of total generation next year, up from 9% this year, and solar is projected to climb from 2% in 2020 to 4% in 2021.

 

Pricing in 2021

 

On the pricing side, Central Appalachian and Northern Appalachian prices are expected to recover quickly from their record lows in 2020, while Powder River Basin prices are only projected to moderately increase.

 

“Subbituminous coal prices are expected to remain only slightly above 2020 levels on average in 2021 as buyers look to higher quality and energy coals, at the expense of less demand for low energy coal,” Platts Analytics said in its US Coal Market Forecast Dec. 18.

 

Thermal exports to drop further

US thermal coal exports are expected to end the year at about 22.7 million mt, a 34% decline on year, and are expected to further drop 2% in 2021 to about 22.1 million mt.

 

“CIF ARA prices remain below levels sufficient for positive netbacks at the mine for most US exporters despite the recent increases,” Platts Analytics said. ARA prices in 2021 are forecast to remain below $80/mt-$85/mt, the range needed to incentivize additional CAPP exports to Europe.

 

“After such a disruptive year, the overarching theme of 2021 will almost certainly be recovery and reaction from COVID-19; how fast and how high,” Platts Analytics said in its Dec. 9 report.

 

While the recovery is already underway, the global macroeconomy and energy demand “are not out of the woods yet,” the report continued.

 

Source : https://www.hellenicshippingnews.com