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GALWAY, IRELAND--December 17, 2015--Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--U.S. coal production is expected to drop by 10%, or 97 million short tons (MMst), for 2015, according to the latest figures from the Energy Information Administration (EIA).
In this month's Short-Term Energy Outlook, the EIA blamed the depressed figures on the swap to gas-fired power by many utilities. The EIA forecasted coal consumption will decrease by 10% in 2015, mainly as a result of a 10% drop in electric power sector consumption. It is bad news in all coal-producing regions, with production decreases across the board. The largest fall was recorded in the Appalachian region (13%). Interior region production, which includes the Illinois Basin, declined by 8%, the first annual decline for that region since 2009. Production in the Western region declined by 9%, dropping below 500 MMst for the first time since 1998.
Declines are also expected in 2016, although not at the same rate. The EIA forecasts that production will decline by an additional 29 MMst, or 3%, in 2016. The Interior region will play a bigger role next year, accounting for 21% of production in 2016 compared to 16% this year. This is attributed to the region's growing competitive advantages over other regions, including the higher heat content of the coal, closer proximity to major markets than coal produced in the Western region, and lower mining costs than Appalachian-produced coal.
The Outlook highlighted that electric power sector coal stockpiles stood at 162 MMst in September, a 4% increase from August, which is similar to the typical seasonal pattern. Overall, stockpiles remain high because of the loss in market share to natural gas for power generation.
"Lower natural gas prices are the primary driver of the decrease in coal consumption," the EIA stated. "Low natural gas prices make it more economical to increase generation at natural gas-fired units and to decrease generation at coal units. Retirements of coal-fired power plants, stemming from both increased competition with natural gas generation and the implementation of the Mercury and Air Toxics Standards (MATS), also reduce coal-fired capacity in the power sector, but the full effect will not be evident until 2016. Higher forecast natural gas prices in 2016 are expected to contribute to higher utilization rates among the remaining coal-fired power plants, which mitigates the effect of lower consumption because of coal-plant retirements."
The Outlook predicted that coal consumption in the power sector will rise by 1% in 2016, as electricity demand rises and electricity generation from natural gas and nuclear decline. The U.S. coal sector has been hammered in recent years, and leading companies like Arch Coal Incorporated (NYSE:ACI) (St. Louis, Missouri) are facing a real threat of bankruptcy. Industrial Info is tracking four Arch projects worth $840 million that would be impacted if bankruptcy occurs. The largest of these is the $400 million, grassroot Tygart Valley underground coal mine and preparation plant, located at Grafton, West Virginia. For additional information, see November 10, 2015, article - Future Looks Tough for Arch Coal, May Seek Bankruptcy.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Our European headquarters are located in Galway, Ireland. Follow IIR Europe on: Facebook - Twitter - LinkedIn For more information on our European coverage send inquiries to europe@industrialinfo.eu or visit us online at Industrial Info Europe.
In this month's Short-Term Energy Outlook, the EIA blamed the depressed figures on the swap to gas-fired power by many utilities. The EIA forecasted coal consumption will decrease by 10% in 2015, mainly as a result of a 10% drop in electric power sector consumption. It is bad news in all coal-producing regions, with production decreases across the board. The largest fall was recorded in the Appalachian region (13%). Interior region production, which includes the Illinois Basin, declined by 8%, the first annual decline for that region since 2009. Production in the Western region declined by 9%, dropping below 500 MMst for the first time since 1998.
Declines are also expected in 2016, although not at the same rate. The EIA forecasts that production will decline by an additional 29 MMst, or 3%, in 2016. The Interior region will play a bigger role next year, accounting for 21% of production in 2016 compared to 16% this year. This is attributed to the region's growing competitive advantages over other regions, including the higher heat content of the coal, closer proximity to major markets than coal produced in the Western region, and lower mining costs than Appalachian-produced coal.
The Outlook highlighted that electric power sector coal stockpiles stood at 162 MMst in September, a 4% increase from August, which is similar to the typical seasonal pattern. Overall, stockpiles remain high because of the loss in market share to natural gas for power generation.
"Lower natural gas prices are the primary driver of the decrease in coal consumption," the EIA stated. "Low natural gas prices make it more economical to increase generation at natural gas-fired units and to decrease generation at coal units. Retirements of coal-fired power plants, stemming from both increased competition with natural gas generation and the implementation of the Mercury and Air Toxics Standards (MATS), also reduce coal-fired capacity in the power sector, but the full effect will not be evident until 2016. Higher forecast natural gas prices in 2016 are expected to contribute to higher utilization rates among the remaining coal-fired power plants, which mitigates the effect of lower consumption because of coal-plant retirements."
The Outlook predicted that coal consumption in the power sector will rise by 1% in 2016, as electricity demand rises and electricity generation from natural gas and nuclear decline. The U.S. coal sector has been hammered in recent years, and leading companies like Arch Coal Incorporated (NYSE:ACI) (St. Louis, Missouri) are facing a real threat of bankruptcy. Industrial Info is tracking four Arch projects worth $840 million that would be impacted if bankruptcy occurs. The largest of these is the $400 million, grassroot Tygart Valley underground coal mine and preparation plant, located at Grafton, West Virginia. For additional information, see November 10, 2015, article - Future Looks Tough for Arch Coal, May Seek Bankruptcy.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Our European headquarters are located in Galway, Ireland. Follow IIR Europe on: Facebook - Twitter - LinkedIn For more information on our European coverage send inquiries to europe@industrialinfo.eu or visit us online at Industrial Info Europe.
