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Friday, 09 January 15
U.S. EASTERN SPOT STEAM COAL PRICES FELL IN 2014; ROSE IN WEST - EIA

U.S. Eastern spot steam coal prices declined in 2014 compared to 2013 levels because of a decline in steam coal exports.

According to U.S. Energy Information Administration, the U.S. coal price declines were particularly pronounced in the second half of the year, as natural gas prices dropped below $4/MMBtu, making higher-priced eastern coals less price competitive as a fuel for generating electricity.

EIA further said in its report, prices of western coal and natural gas both increased year-on-year although rail delivery problems stranded some Powder River Basin (PRB) coal and drove down its price in the second half of the year.

According to EIA, coal prices east of the Mississippi River generally trended downward in 2014. Central Appalachian (CAPP) coal remained largely uneconomic compared with natural gas for generating electricity, and within the coal market, CAPP lost market share to other domestic and imported sources of supply. Additions of sulfur dioxide (SO2) scrubbers at more power plants in response to environmental regulations have enabled operators to switch to higher-sulfur, lower-cost Illinois Basin (ILB) coal. Closures of higher-cost mine operations in the CAPP basin, which accelerated in 2013, continued in 2014.

Elsewhere in the East, Northern Appalachian (NAPP) coal prices remained largely unchanged, and ILB coal prices declined slightly on a year-on-year basis driven mainly by price drops in the second half of the year. Lower international coal prices and exports as well as gas prices dropping to below $4/MMBtu drove the price movements.

In the West, the average price of PRB coal increased in 2014, although the potential for additional shipments and even higher prices was hindered by rail deliverability problems. Increased rail traffic for other commodities, coupled with rail service disruptions in the first part of the year, limited the volume of shipments originating from the PRB to rebuild power plant inventories depleted during the very cold 2013-14 winter.

EIA noted that, overall coal demand decreased, production increased slightly, and sub-bituminous coal inventories declined significantly.

According to EIA, U.S. coal demand declined 0.9%, about 7 million short tons (MMst), in 2014 mainly because of falling coal exports. Nearly all domestically produced coal is used in the power sector, and total coal consumption for electricity generation for the first 11 months of 2014 was 10.3 MMst, or 1%, more than the same period in 2013. However, these gains were outweighed by a sharp decline in coal exports, which for the first nine months of 2014, fell by nearly 16 MMst (17%) compared to the same period in 2013.

Continued weakening in the European economy, slower demand growth in Asia, increased output from other coal-exporting countries, and lower international coal prices all contributed to this decrease in exports, EIA noted.

U.S. coal production increased slightly, by 0.3% in 2014. When all the data are in, total coal production in 2014 is projected to be 0.2 MMst higher than in 2013, according to Mine Safety and Health Administration (MSHA) data through the first half of 2014 coupled with EIA estimates for the second half of 2014. Although relatively small compared to domestic supplies, coal imports in the first nine months of the year were 2.1 MMst (31%) higher than imports for the same period of 2013.

Stockpiles of coal held at generators in the electric power sector dropped by nearly 12 MMst (8%) from the end of 2013 to 136.2 MMst at the end of October 2014, with monthly levels near or below the previous five-year average. Sub-bituminous coal stocks (mostly from the PRB) fell more sharply than bituminous coal stocks, down 8.1 MMst (12%) versus 4.8 MMst (7%), respectively.
Source: EIA | Principal contributors: Elias Johnson, Ayaka Jones



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