Coal

According to data compiled by the Association of American Railroads (AAR), year-to-date rail coal shipments were down by 0.1% as of September 27. AAR data show that total U.S. rail traffic is up 4.4% year-to-date and shipments of petroleum and grain are up by 12.5% and 17.7%, respectively.

Two railways that serve Powder River Basin (PRB) producers, Union Pacific and BNSF, provided the U.S. Surface Transportation Board (STB) with their assessments of their ability to provide rail service for the remainder of the year (fall peak period) and the upcoming winter season. The STB annually requests the assessments from all Class I railroads. Union Pacific stated that it has responded by activating surge resources, which included acquiring more locomotives, hiring more employees, and increasing coal train sizes where possible. BNSF also plans to expand its locomotive fleet and increase coal train sizes, but they emphasized that their priority will be to transport coal that is currently contracted.

Coal Supply

EIA estimates that coal production for the first three quarters of this year, 742 million short tons (MMst), was slightly lower (3 MMst, or 0.4%) than production over the same period last year. Year-to-date production in the West, which includes the PRB, is down by nearly 2 MMst, and has been hindered by rail transportation problems. EIA expects that U.S. coal production will accelerate in the fourth quarter and annual production will grow 1.4% to 998 MMst in 2014. In 2015, forecast U.S. coal production increases by 0.4% to 1,002 MMst.

Electric power sector coal inventories fell to 125 MMst at the end of July, 7 MMst lower than the previous month. This stock drawdown was 4 MMst less than the same time last year. Coal inventory reductions in the Midwest and South, two regions that rely heavily on coal-fired generation, were down 1 MMst and 2 MMst, respectively, when compared with last year.

Coal Consumption

Higher electricity demand and higher power sector natural gas prices that are more than 21% above their 2013 level contributed to a 3.0% increase in electric power sector coal consumption for the first seven months of this year from the same period last year. EIA projects total coal consumption of 941 MMst in 2014, an increase of 1.7% from last year. Total coal consumption is projected to fall by 2.0% in 2015, as retirements of coal power plants rise in response to the implementation of the Mercury and Air Toxics Standards, electricity sales growth slows to 0.6%, and natural gas prices fall relative to coal prices.

Coal Trade

EIA estimates that coal exports for the first seven months of this year were 15.5% (10.9 MMst) lower compared with last year, with tonnage declines for steam coal exports more than 4 times those for metallurgical coal. Exports of coal are projected to decline to 96 MMst in 2014 from 118 MMst in 2013, primarily because of slowing world coal demand growth, lower international coal prices, and increasing coal output in other coal-exporting countries. EIA projects coal exports to remain nearly flat in 2015.

Coal imports for the first seven months of this year increased by 36.5% (1.8 MMst) compared with last year. EIA expects coal imports, which account for about 1% of U.S. coal consumption, to total 11.4 MMst in 2014 and fall slightly to 10.7 MMst in 2015.

Coal Prices

Annual average coal prices to the electric power industry fell from $2.39/MMBtu in 2011 to $2.35/MMBtu in 2013. EIA expects the average delivered coal prices to be $2.36/MMBtu in 2014 and remain at that level in 2015.