Unstable year had a less treacherous end

WHILE all the major coal basins saw a drop in spot prices during the first half of 2012, the second half showed more stability.
Unstable year had a less treacherous end Unstable year had a less treacherous end Unstable year had a less treacherous end Unstable year had a less treacherous end Unstable year had a less treacherous end

Courtesy, EIA

Donna Schmidt

This has been revealed in data from the US Energy Information Administration regarding coal prices and production over the past year.

In an energy brief report released Monday, the federal agency said that while wholesale prices dropped nationwide, it was the Appalachian and Powder River Basins that felt the sting most.

Officials cited competition between thermal coal and natural gas generation prices, particularly during the northern summer months, along with milder winter temperatures and high power plant stockpiles that limited coal purchases in the second six months of 2012.

“With new competition from Illinois Basin 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,” the EIA said.

At the same time, average annual PRB spot prices fell almost 30% year-on-year versus 2011, while prices in the Illinois Basin trend and fell just 5%.

That is because, bucking the downward trend, the basin had 9% increase in production on higher demand for low-cost, high-sulfur coal and that offset the overall result.

The EIA noted that, across the US, production as a whole was down almost 7%, most everywhere.

“Central Appalachia production decreased significantly, down 19%, followed by a 9% production decline in PRB. By contrast, coal production volumes in the Illinois Basin rose above its five-year range,” it said.

The push for Illinois coal was, in part, the need for electric utility scrubber additions to meet proposed US Environmental Protection Agency regulations that will limit sulfur dioxide emissions.

With scrubbers installed, plants using the high-sulfur coal coming from the mines of that region can reduce the need to buy and surrender SO2 emissions permits by 90% versus the same plant without a scrubber.

The result, the EIA noted, is a more competitive coal in the Illinois Basin, especially when lined up next to central Appalachia where low sulfur content was previously a competitive advantage.

“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 said.

“Record exports of both thermal and metallurgical coal partially offset declines in consumption in the power sector.”

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