Coal Age

DEC 2015

Coal Age Magazine - For more than 100 years, Coal Age has been the magazine that readers can trust for guidance and insight on this important industry.

Issue link: https://coal.epubxp.com/i/618612

Contents of this Issue

Navigation

Page 29 of 77

This year will likely be remembered as the year the U.S. coal market hit bottom. Low demand led to low prices, which yielded production cutbacks, mine closures and some bankruptcies. As a result, U.S. coal production in 2015 is on target to slip to 908 million short tons, the lowest annual amount since 1986. The market wasn't helped by a raft of new environmental regulations, such as the Clean Power Plan (CPP), that threaten coal's standing as the nation's primary fuel for electricity generation. "From a producer's standpoint, this is a year to forget," said Seth Schwartz, a principal at Energy Ventures Analysis, an Arlington, Virginia-based energy consultancy. "You simply can't add up how bad this year is." One only has to look at prices to see why. In Central Appalachia, the price for rail-delivered 12,500 Btu/lb coal in the over-the-counter spot market has declined from an average of $57.79/ton in 2014 to an average of $43.28/ton through November 19 of this year. The price peaked at $160.60/ton in 2008. In the Powder River Basin, the nation's largest coal production region, the price for rail-delivered 8,800 Btu/lb in the OTC spot market has declined from an average of $11.97/ton in 2014 to an average of $10.53/ton through November 19 of this year. The price peaked at $22.65/ton in 2006. Many factors led to the coal market's decline in 2015. One has been the decline in exports. In 2012, the U.S. exported a record 126 million tons. The figure was largely driven by an increase in thermal coal exports, as cheap natural gas pushed excess coal overseas. The exports were supported by higher seaborne pricing, but global oversupply has since pushed prices down. In January 2012, Platts assessed the price for thermal coal delivered into northern Europe, the CIF ARA marker, at $110.65 per metric ton (mt). As of November 19, the price has fallen to $55/mt, a 50.3% drop. Due to lower seaborne pricing, the Energy Information Administration (EIA) expects U.S. coal exports to total just 79.2 million tons in 2015, the majority being metallur- gical coal. Exports have also been impact- ed by the strong U.S. dollar, which has made both U.S. thermal and met coal uncompetitive overseas. B u t c h i e f a m o n g t h e r e a s o n s f o r t h e coal market's decline in 2012 has been c h e a p n a t u r a l g a s . T h e a v e r a g e 2 0 1 5 price of the NYMEX Henry Hub natural gas futures contract through November 19 totaled $2.695/MMBtu, down 36.7% f r o m t h e 2 0 1 4 a v e r a g e p r i c e o f $ 4 . 2 6 3 / M M B t u . I n m a n y p a r t s o f t h e country, the actual gas is even cheaper. Daily prices at Dominion South, a trad- ing hub in southwestern Pennsylvania, in the heart of Appalachian coal country, are averaging $1.506/MMBtu so far this year, compared with $3.255/MMBtu in 2014. For comparison, the average price through August of this year — the most recent data available — for delivered coal m i n e d i n N o r t h e r n a n d C e n t r a l Appalachia is $2.866/MMBtu, according to the EIA. Blame lower natural prices on increased natural gas production. In January 2011, U.S. drillers produced roughly 57.5 billion cubic feet per day (Bcf/d). This year, pro- duction is hovering around 72 Bcf/d, according to Platts Analytics. The result- ing glut of gas has made a serious dent in coal generation. The average capacity fac- tor — the amount of time a plant is run- ning — for the U.S. coal fleet has fallen from 67% in 2010 to 54% in 2015, accord- ing to Platts Analytics. In sum, the EIA estimates coal will total 34.7% of total U.S. electricity generation in 2015 compared with 42.4% in 2011. The total was as high as 49.6% in 2005. marketwatch 28 www.coalage.com December 2015 U.S. Coal Markets Hit Bottom B Y A N D R E W M O O R E PRB 8,800 Btu/lb OTC Coal vs. NYMEX Henry Hub Natural Gas Futures

Articles in this issue

Links on this page

Archives of this issue

view archives of Coal Age - DEC 2015