EIA projects mostly flat production in 2013

WHILE some mines have called back workers and the western coalfields are expected to enjoy respectable growth in 2013, next year’s production year-on-year will have little change, according to the US Energy Information Administration in its Short-Term Energy Outlook.

Donna Schmidt

The agency said there was a silver lining for US coal producers – namely a projected increase of 6% in domestic coal consumption.

However, totals for the year will likely be close to its 2012 levels mainly due to drawdowns of coal stockpiles and lower exports, which will offset any consumption gains.

The most recent outlook report forecast a 7% drop in 2012 coal production over 2011, stemming mostly from a reduction in domestic consumption in the electric power sector.

Additionally, coal production between January and September of this year, the EIA’s first three measured quarters, was 46 million short tons shy of the same period last year.

Coal production in Appalachia and the western region will both decline by 8% this year.

However, the EIA expects that the interior’s losses will be lower – about 3% – due to strong Illinois Basin coal demand.

EIA said the western coalfields trend would likely reverse course in 2013 and grow as much as 5% to 571Mst.

Unfortunately, the numbers will fall for the Appalachian and interior regions for a second consecutive year.

That aforementioned silver lining – a jump in domestic demand from electricity generators – could help slow mine shutdowns and cutbacks and continue the recent positive string of callback announcements trend set by Consol Energy and Southern.

Playing a part will be a stark slowdown in the transition of coal plants to what was, for a while anyway, rock bottom-priced natural gas.

“Demand in the electric power sector is expected to total 825Mst in 2012 and rise to 871Mst in 2013,” the EIA said.

“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.

“EIA forecasts 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%.”

According to outlook estimates, electricity sector inventories are predicted to rise by almost 10Mst this year but fall by about 5Mst in 2013.

Primary inventories at mines and distribution points will lead to a slight decrease in the coming year as well.

“Total coal exports (including both steam and metallurgical coal), which are currently projected to total a record 125Mst in 2012, are expected to decline in 2013 but remain above 100Mst for the third straight year,” the EIA said.

‘The primary reasons for the expected decline in coal exports include continuing economic weakness in Europe, lower international coal prices and increasing production in Asia.”

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