US coal production this year could drop to a low not seen in almost 20 years, the US Energy Information Administration said in its Short-Term Energy Outlook for April.
EIA predicts US coal production will now total 926 million st in 2015, down 17 million st from its estimate last month, as both domestic demand and exports continue to decline.
If the EIA’s estimate holds, it would be the lowest annual total for US coal production since 1987, when 918.8 million st was produced.
In 2016, the agency predicts US coal production will rise to 941.4 million st, down 10 million st from its last estimate, made in March. In 2014, US coal production totaled 996.7 million st.
A rise in the use of natural gas in electricity generation during the first few months of the year will lead to less coal consumption by utilities in 2015, the agency said. Generation fueled by coal will total 35.8% this year, down from 38.7% in 2014.
During first-quarter 2015, the EIA estimates gas accounted for 28.5% of total generation, up from a 23.6% fuel share during Q1 2014. The Henry Hub natural gas price averaged $2.90/MMBtu in Q1, down sharply from $5.20/MMBtu during Q1 2014.
EIA expects the gas fuel share to average 30.4% for 2015, up from 27.4% last year.
In 2016, EIA estimates coal to account for 36.2% of generation, while gas will make up 29.6% of generation.
Coal prices, which finished 2014 averaging $2.36/MMBtu, are estimated to total $2.31/MMBtu in 2015 and $2.33/MMBtu in 2016.
The Henry Hub natural gas spot price averaged $2.83/MMBtu in March, down 4 cents from February. The EIA expects monthly average spot prices to remain less than $3/MMBtu through May, and less than $4/MMBtu through the remainder of the forecast.
The Henry Hub natural gas price will average $3.07/MMBtu in 2015 and $3.45/MMBtu in 2016, according to the EIA.
OVERALL COAL CONSUMPTION SET TO FALL
EIA projects coal consumption in the electric power sector will fall 6% this year to 803.3 million st. Milder weather in Q1 compared with the same period of 2014 and lower gas prices are primary factors driving the decline, the agency said. The retirements of coal power plants in response to the implementation of the Environmental Protection Agency’s Mercury and Air Toxics Standards rule also will contribute to the decline.
The full effect of the coal plant retirements will be felt in 2016, but rising power demand and higher gas prices will increase the use of the remaining coal-fired fleet, mitigating retirements as coal consumption for generation will rise 2% year on year to 818.9 million st.
Overall coal consumption in all sectors for 2015 is estimated at 867.4 million st, down 5.4% year on year.
MET COAL EXPORTS EXPECTED TO FALL 22.5% YEAR ON YEAR
Slower growth in world demand, lower international prices and higher coal output in other countries have resulted in a two-year decline in coal exports, the agency said.
The EIA projects coal exports will fall to 83 million st this year, down 10.3% from 2014. Met coal will see a 22.5% decline in exports year on year to total 48.8 million st, while there will be a slight rise in thermal coal exports to total 34.5 million st, up 200,000 st from 2014.
US coal imports, which rose by more than 2 million st in 2014 to 11.3 million st, are expected to remain near that level during the next two years.