The U.S. Energy Information Administration’s latest Short-Term Energy Outlook projects total U.S. coal production in 2013 to be close to its 2012 level as coal stockpile drawdowns and lower exports offset a projected increase in domestic coal consumption.
This Short-Term Energy Outlook forecasts a 7% decline in coal production in 2012 from 2011 as domestic consumption, primarily in the electric power sector, falls, EIA noted in a Dec. 3 statement. Coal production for the first three quarters (January-September) of 2012 was 46 million tons below the same period in 2011. Appalachian and Western region coal production are expected to both decline by 8% in 2012, but the production decline in the Interior should be lower, at 3%, because of strong demand for Illinois Basin coal. However, Western coal output is expected to reverse course in 2013 and grow 5% to 571 million tons, while Appalachian and Interior region coal production are expected to fall for a second straight year.
Some mining companies have announced restarts of mines, while others have shut down facilities, the EIA pointed out. Patriot Coal, currently in Chapter 11 bankruptcy protection, recently announced it was closing mining facilities that produce thermal coal in western Kentucky, but CONSOL Energy (NYSE: CNX) announced the restart of its idled Buchanan metallurgical coal mine in Virginia.
Demand in the electric power sector is expected to total 825 million tons in 2012, and rise to 871 million tons in 2013. This 6% increase results from an expected decline in coal-to-gas substitution, as natural gas prices are expected to be higher than 2012 levels, the agency said. EIA is forecasting that prices for natural gas delivered to electric generators during 2013 will average about 22% higher than during 2012, while the average cost of delivered coal will go up only 1%.
Expected withdrawals from coal inventories, from both primary and secondary sources, will help offset the demand increase in the electric power sector, EIA added. Inventories held by the electric power sector, which are predicted to rise by nearly 10 million tons in 2012, are expected to fall by 5 million tons in 2013. Primary inventories, which are held at the mines and distribution points, are expected to decrease slightly in 2013 as well.
Total coal exports (including both steam and metallurgical coal), which are currently projected to total a record 125 million tons in 2012, are expected to decline in 2013, but remain above 100 million tons for the third straight year. The primary reasons for the expected decline in coal exports include continuing economic weakness in Europe, lower international coal prices, and increasing coal production in Asia.