Coal

U.S. Coal Consumption.

EIA forecasts that electric power sector coal consumption will be about 800 million short tons (MMst) in both 2012 and 2013. Prices for natural gas delivered to the electric power industry fell by 7.5 percent in 2011, which contributed to a significant increase in the share of natural-gas-fired generation. EIA expects this trend to continue in 2012, with electric power sector coal consumption falling by 14 percent (U.S. Coal Consumption Chart). EIA expects that electric power sector coal consumption will increase by 1.2 percent in 2013, as projected power industry coal prices fall (4 percent) and natural gas prices increase.

U.S. Coal Supply

EIA forecasts that coal production will decline by 10.2 percent in 2012 as domestic consumption and exports fall (U.S. Coal Production Chart). Production for the first three months of 2012 was 22 MMst below last year’s value for the same period. Annual production declines greater than 25 MMst are expected in each of the three coal-producing regions (Appalachia, Interior and Western). Despite declines in production, EIA projects that secondary inventories will increase in 2012, with electric power sector stocks exceeding 200 MMst, and inventories will remain at elevated levels in 2013 (U.S. Electric Power Sector Coal Stocks Chart).

U.S. Coal Trade

EIA expects U.S. coal exports to remain strong but fall below the 107 MMst exported in 2011. Forecast U.S. coal exports are 100 MMst in 2012 and 97 MMst in 2013. U.S. coal exports averaged 56 MMst in the decade preceding 2011.

U.S. Coal Prices

Delivered coal prices to the electric power industry had increased steadily over the last 10 years and this trend continued in 2011, with an average delivered coal price of $2.40 per MMBtu (a 5.8 percent increase from 2010). However, EIA expects the decline in demand for coal to generate electricity will put downward pressure on coal prices and contribute to the shut-in of higher-cost production. Several companies have recently announced the curtailment of operations, particularly in Appalachia, where production costs at some older mines are high. EIA forecasts the average delivered coal price in 2012 will be 2.8 percent lower than the 2011 average price. EIA predicts the 2013 average delivered coal price to be $2.24 per MMBtu, or 3.8 percent lower than the previous year’s price.