US production at four-year low: EIA

THE latest quarterly report from the Energy Information Administration reflects the scope of the weakened coal market, with demand in the March quarter dropping to its lowest level since 2002 and consumer stockpiles the highest in more than 20 years.
US production at four-year low: EIA US production at four-year low: EIA US production at four-year low: EIA US production at four-year low: EIA US production at four-year low: EIA


Donna Schmidt

For the first three months of 2009, production totalled 281.4 million tons. EIA said this was the country’s lowest quarterly production since mid-2005 and the lowest first quarter production since 2004.

Between the fourth quarter of 2008 and the first quarter of this year, US coal consumption dropped 6% to 255.1Mt, the lowest since mid-2002.

The slump in consumption when combined with previously contracted supply agreements pushed consumer stocks to a 22-year high of 184.6Mt.

Coal exports dived 40% to 13.3Mt in the first three months of the year compared to the December quarter.

Before the start of 2009, US coal exports exceeded 20Mt for three consecutive quarters, even reaching the highest level since 1981 in one quarter.

Imports were also down from the December quarter to the March quarter, falling 30% to 6Mt.

“No longer buoyed by high global demand and faced with decreasing prices, US coal producers began to either reduce shifts at mines or to temporarily close the mines until prices recover,” EIA said.

“This effect was felt particularly strongly in the Appalachian region, which had benefited the most from the recent strength of the global coal market due to its relevant abundance of metallurgical coal and proximity to the country’s coal export facilities.

"While the decreased demand for steel worldwide led to a reduced demand for US metallurgical coal, the decrease in US steam coal exports proved to be even greater."

The agency did highlight one positive point among the bleakness: a steady hand on prices.

“As a result of long-term contracts signed by coal consumers when prices were higher, domestic coal prices did not fall with demand. Specifically, while demand for coal was falling between the fourth quarter of 2008 and the first quarter of 2009, the average delivered price of coal paid by all consumers actually increased.”

The EIA also amended its 2009 forecast for coal use this week, noting that power plants will use 5.2% less in 2009 than last year thanks to slowing demand along with a spike in natural gas interest.

According to its revised monthly outlook, generation facilities will burn approximately 987Mt of coal this year, a deeper slump from the 994Mt estimated in its June report. In 2008, the nation’s power plants used more than 1.04 billion tons of coal.

"The 5.2 per cent decline in coal consumption in the electric power sector is the result of lower total electricity generation coupled with projected increases from other generating sources, including natural gas, nuclear, hydroelectric and wind," the agency said.

The EIA noted that “very weak industrial activity” would bring levels of coal consumption for coke production down by 38% this year to about 14Mt.

However, the agency reiterated its anticipation of a market recovery in power demand, forecasting facilities would once again use more than 1Bt of coal in 2010.