Total U.S. carloads of coal moving by rail during the first quarter of 2012 fell to 1.55 million, the lowest level for any quarter since the beginning of 1994, said the U.S. Energy Information Administration in a brief April 16 report.
That slump in rail movements comes as demand for coal by the U.S. electricity sector has decreased. The power sector accounts for more than 90% of the coal consumed in the U.S. Although carloads of coal via rail are down, the share of total coal deliveries that are made via rail has grown in recent years, EIA said.
One important point is that a lot of U.S. coal moves by both rail and barge. For example, some Powder River Basin coal is railed from Wyoming and Montana to Great Lakes and river ports where it is transloaded to ship and barge for final delivery to power plants on or near a navigable body of water.
The share of U.S. coal transported by rail has been growing in recent years as demand for low-sulfur coal produced mainly in the Wyoming PRB increased, EIA noted. Over 70% of domestic coal was delivered by rail last year, which is a figure calculated using data through the third quarter of 2011, up from around 65% a decade ago. Rail is the most common method for transporting large volumes of western coal over long distances to power plants located in the eastern half of the U.S.
Coal-fired generation at U.S. power plants has decreased recently, reflecting both lower natural gas prices that have encouraged competition between natural gas and coal in the power sector and mild weather that has reduced the demand for electricity for winter heating.
Coal market demand and pricing is getting so bad that one veteran coal industry consultant told GenerationHub on April 17 that there may be a “bloodbath” among coal producers over the next few months, with several bankruptcies possible. Trinity Coal, for example, said it may have to seek bankruptcy if it loses a major coal supply contract with the South Carolina Public Service Authority. Trinity Coal is battling to keep that contract, which the authority wants to terminate for failure to met coal quality specs, in court.
The U.S. Energy Information Administration said in its April Short-Term Energy Outlook released April 10 that it expects electricity generation from coal to decline by about 10% in 2012 as generation from gas increases by about 17%. EIA is forecasting that power generation from coal will increase by about 7% and generation from natural gas fall by 3% in 2013 as projected coal prices fall slightly while natural gas prices increase, allowing coal to regain some of its power sector share.
“EIA forecasts that electric power sector coal consumption will be well below 900 million short tons (MMst) in both 2012 and 2013,” said the April 10 report. “Power sector natural gas prices have fallen significantly, leading generators in several regions to increase the share of natural gas-fired generation.”
EIA projects coal production to decline by 7.6% in 2012 as domestic consumption and exports fall. Production declines greater than 20 million tons are expected in each of the three coal-producing regions (Appalachia, Interior and Western). EIA projects that secondary coal inventories will increase in 2012, with electric power sector stocks exceeding 200 million tons, and that inventories will remain at these levels in 2013.