Wholesale (spot) coal prices across all U.S. basins fell during the first half of 2012 before stabilizing in the latter half of the year, said the U.S. Energy Information Administration in the Jan. 14 version of its “Today in Energy” feature.
Competition between natural gas and coal for electric power generation drove price declines in the Appalachian region and the Powder River Basin (PRB), two key sources for thermal coal, through the summer, EIA noted. Also, mild temperatures in the winter and high stockpiles at electric power plants limited demand for more purchases of coal in the second half of 2012.
While spot prices fell across the country, Appalachia and the PRB were affected the most, EIA reported. With new competition from the high-sulfur Illinois Basin at newly-scrubbed power plants and ongoing natural gas displacement, annual average Central and Northern Appalachia prices reflected their most significant declines since 2009, falling 18% and 14%, respectively, from 2011, EIA said. Average annual PRB spot prices for 2012 fell almost 30% compared to 2011. Illinois Basin coal prices declined just 5%, partially offset by a 9% increase in production because of robust demand for the region’s generally low-cost, high-sulfur coal.
U.S. coal production, down almost 7%, fell almost everywhere in 2012. Central Appalachia production decreased significantly, down 16%, followed by a 9% production decline in the PRB, EIA said. By contrast, coal production volumes in the Illinois Basin rose above its five-year range, up 9% from 2011. EIA puts the total U.S. coal production for 2012, which is subject to some later revision as numbers are confirmed, at 1.02 billion tons, down from nearly 1.1 billion tons in 2011.
The new scrubbers on power plants in the eastern U.S. make Illinois Basin coal much more competitive, especially against Central Appalachia, which previously could rely on its low sulfur content as a competitive advantage, EIA said. In addition to its relative low cost, Illinois Basin coal is more likely to be used in larger, more efficient plants with modern pollution control equipment, helping it compete against low natural gas prices, the agency added. Record exports of both thermal and metallurgical coal partially offset declines in consumption in the power sector.
EIA has estimated that coal consumption in the electric power sector totaled 829 million tons in 2012, the lowest amount since 1992. Lower natural gas prices paid by electric generators led to a significant increase in the share of natural gas‐fired generation.
In the week ending Jan. 5, EIA said that U.S. coal production totaled approximately 18.3 million tons. This production estimate is 10.9% higher than the prior week’s estimate and 17% lower than the production estimate in the comparable week in 2012. Coal production east of the Mississippi River in the week ending Jan. 5 totaled 7.9 million tons, and west of the Mississippi River came in at 10.4 million tons.