Released February 08, 2022 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Coal is having an unexpected resurgence during the energy transition, and while the good news may last another year or two, it is not expected to fundamentally change the outlook for either thermal or metallurgical coal, at least in the U.S., according to Joseph Govreau, Industrial Info's vice president of research for the Metals & Minerals industry.
High natural gas costs have caused power plant owners in the U.S. and Europe to switch to thermal coal for economic reasons, he explained in a recent interview. Strong demand growth for steel, both in China and the U.S., has pushed up the demand for metallurgical coal, which is used in steelmaking.
In its January Short-Term Energy Outlook, the U.S. Energy Information Administration (EIA) (Washington, D.C.), a branch of the U.S. Department of Energy (DoE), wrote: "U.S. coal production totaled 579 million short tons (MM STs) in 2021, up 44MM STs, or 8%, from 2020. The 2021 increase primarily reflected more consumption of coal in the electric power sector amid an increase in natural gas spot prices, which made coal more economically competitive relative to natural gas for electricity generation." The EIA top-line figure combined thermal and metallurgical coal.
Overall U.S. coal production is expected to grow 33 MM STs this year and another 8 MM STs in 2023. Most of the coal produced each year in the U.S. is thermal coal, used to generate electricity.
Coal-burning utilities will increase their purchase of coal this year mainly to restock their depleted inventories, the STEO predicted: "Electric power sector inventories saw significant draws in 2021, and we expect stocks to increase by the end of 2023."
In late 2021, the agency reported that coal inventories at U.S. power producers had fallen to levels not seen since the late 1970s.
Click on the image at right to see a graphic of coal inventories at U.S. power plants.
The restocking is evident in the EIA's most recent quarterly coal report, which includes data through September 30, 2021. Coal use by U.S. electric generators was up 29% for the first three quarters of 2021 compared to year-earlier usage, to about 419 MM STs compared to roughly 324 MM STs for the comparable year-earlier period. The U.S. coal power burn for that most recent nine-month period was about equal to coal power burn for the first three quarters of 2019, before the COVID-19 pandemic, EIA said.
Click on the image at right to see coal use by U.S. electricity generators.
Prior to last year's uptick in coal use for electric generation, demand steadily declined for the five years preceding 2021, the EIA said.
"The recent surge in coal demand among electric generators had led to an increased level of project activity at coal mines in the U.S.," said Govreau. "Some operators are having trouble keeping up with demand, which is pushing prices up. Mine operators are facing labor shortages caused by staff reductions, as well as the pandemic. Obtaining financing on acceptable terms also is getting harder."
Industrial Info is tracking about 269 U.S. coal-mining projects valued at approximately $7.4 billion, he said, adding that much of that project activity is for metallurgical coal.
The January 31 announcement by Georgia Power Company (GPC) (Atlanta, Georgia), a unit of the Southern Company (NYSE:SO) (Atlanta), that it would close over 3,500 megawatts (MW) of coal-fired electric generation by 2028 continues a long trend among U.S. power plant owners of retiring coal-fired generation in favor of natural gas generation or renewables. For more on that, see February 9, 2021, article - U.S. Coal-Fired Power Plant Retirements Could Reach 55,000 Megawatts in Coming Decade.
"Retirement of coal-fired power plants is not going to change," Govreau remarked. Europe, which is going through an energy crisis made worse by the potential for war between Russian and the Ukraine, has not measurably increased its imports of thermal coal from the U.S.
U.S. coal exports have surged, but most of that is metallurgical coal and most of that is going to China, the EIA's STEO said. It said the U.S. exported about four times its normal level of metallurgical coal to China through the first 10 months of 2021.
China produces far more steel than the U.S., and its demand for met coal has increased as its steel production surges, Govreau said. Demand for steel in the U.S. also is expected to surge as the government implements the bipartisan infrastructure bill that was signed into law in late 2021. But the steel industry in the U.S. and China is less dependent on traditional coal-fired blast furnaces to turn iron ore into steel. These days, most steelmaking in the U.S. and China uses electric arc furnaces, mainly fired by natural gas.
"Increased demand and prices for thermal and met coal are good news for an industry that hasn't had a lot of good news lately," Govreau said. "But the long-term trend hasn't changed: It's an industry in decline, for various reasons."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
High natural gas costs have caused power plant owners in the U.S. and Europe to switch to thermal coal for economic reasons, he explained in a recent interview. Strong demand growth for steel, both in China and the U.S., has pushed up the demand for metallurgical coal, which is used in steelmaking.
In its January Short-Term Energy Outlook, the U.S. Energy Information Administration (EIA) (Washington, D.C.), a branch of the U.S. Department of Energy (DoE), wrote: "U.S. coal production totaled 579 million short tons (MM STs) in 2021, up 44MM STs, or 8%, from 2020. The 2021 increase primarily reflected more consumption of coal in the electric power sector amid an increase in natural gas spot prices, which made coal more economically competitive relative to natural gas for electricity generation." The EIA top-line figure combined thermal and metallurgical coal.
Overall U.S. coal production is expected to grow 33 MM STs this year and another 8 MM STs in 2023. Most of the coal produced each year in the U.S. is thermal coal, used to generate electricity.
Coal-burning utilities will increase their purchase of coal this year mainly to restock their depleted inventories, the STEO predicted: "Electric power sector inventories saw significant draws in 2021, and we expect stocks to increase by the end of 2023."
In late 2021, the agency reported that coal inventories at U.S. power producers had fallen to levels not seen since the late 1970s.
Click on the image at right to see a graphic of coal inventories at U.S. power plants.The restocking is evident in the EIA's most recent quarterly coal report, which includes data through September 30, 2021. Coal use by U.S. electric generators was up 29% for the first three quarters of 2021 compared to year-earlier usage, to about 419 MM STs compared to roughly 324 MM STs for the comparable year-earlier period. The U.S. coal power burn for that most recent nine-month period was about equal to coal power burn for the first three quarters of 2019, before the COVID-19 pandemic, EIA said.
Click on the image at right to see coal use by U.S. electricity generators.Prior to last year's uptick in coal use for electric generation, demand steadily declined for the five years preceding 2021, the EIA said.
"The recent surge in coal demand among electric generators had led to an increased level of project activity at coal mines in the U.S.," said Govreau. "Some operators are having trouble keeping up with demand, which is pushing prices up. Mine operators are facing labor shortages caused by staff reductions, as well as the pandemic. Obtaining financing on acceptable terms also is getting harder."
Industrial Info is tracking about 269 U.S. coal-mining projects valued at approximately $7.4 billion, he said, adding that much of that project activity is for metallurgical coal.
The January 31 announcement by Georgia Power Company (GPC) (Atlanta, Georgia), a unit of the Southern Company (NYSE:SO) (Atlanta), that it would close over 3,500 megawatts (MW) of coal-fired electric generation by 2028 continues a long trend among U.S. power plant owners of retiring coal-fired generation in favor of natural gas generation or renewables. For more on that, see February 9, 2021, article - U.S. Coal-Fired Power Plant Retirements Could Reach 55,000 Megawatts in Coming Decade.
"Retirement of coal-fired power plants is not going to change," Govreau remarked. Europe, which is going through an energy crisis made worse by the potential for war between Russian and the Ukraine, has not measurably increased its imports of thermal coal from the U.S.
U.S. coal exports have surged, but most of that is metallurgical coal and most of that is going to China, the EIA's STEO said. It said the U.S. exported about four times its normal level of metallurgical coal to China through the first 10 months of 2021.
China produces far more steel than the U.S., and its demand for met coal has increased as its steel production surges, Govreau said. Demand for steel in the U.S. also is expected to surge as the government implements the bipartisan infrastructure bill that was signed into law in late 2021. But the steel industry in the U.S. and China is less dependent on traditional coal-fired blast furnaces to turn iron ore into steel. These days, most steelmaking in the U.S. and China uses electric arc furnaces, mainly fired by natural gas.
"Increased demand and prices for thermal and met coal are good news for an industry that hasn't had a lot of good news lately," Govreau said. "But the long-term trend hasn't changed: It's an industry in decline, for various reasons."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
