EIA: Coal production to remain level in 2013

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The Energy Information Administration's short-term energy outlook projects total U.S. coal production in 2013 to be close to its 2012 level in the November 2012 Short-Term Energy Outlook as coal stockpile drawdowns and lower exports offset a projected increase in domestic coal consumption.

The November 2012 short-term energy outlook forecasts a 7 percent decline in coal production in 2012 from 2011 as domestic consumption, primarily in the electric power sector, falls. Coal production for the first three quarters (January-September) of 2012 was 46 million short tons (MMst) below the same period in 2011.

Appalachian and Western region coal production are expected to both decline by 8 percent in 2012, but the production decline in the Interior should be lower, at 3 percent, because of strong demand for Illinois Basin coal. However, Western region coal output is expected to reverse course in 2013 and grow 5 percent to 571 MMst, while Appalachian and Interior region coal production are expected to fall for a second straight year.

Some mining companies have announced restarts of mines, while others have shut down facilities they operate. Patriot Coal recently announced it was closing mining facilities that produce thermal coal in Kentucky, but Consol Energy announced the restart of its idled Buchanan metallurgical coal mine in Virginia.

Demand in the electric power sector is expected to total 825 MMst in 2012, and rise to 871 MMst in 2013. This 6 percent increase results from an expected decline in coal-to-gas substitution, as natural gas prices are expected to be higher than 2012 levels. EIA forecasts that prices for natural gas delivered to electric generators during 2013 will average about 22 percent higher than during 2012, while the average cost of delivered coal will go up only 1 percent.

Expected withdrawals from coal inventories, from both primary and secondary sources, will help offset the demand increase in the electric power sector.

Inventories held by the electric power sector, which are predicted to rise by nearly 10 MMst in 2012, are expected to fall by 5 MMst in 2013. Primary inventories, which are held at the mines and distribution points, are expected to decrease slightly in 2013 as well.

Total coal exports (including both steam and metallurgical coal), which are currently projected to total a record 125 MMst in 2012, are expected to decline in 2013, but remain above 100 MMst for the third straight year. The primary reasons for the expected decline in coal exports include continuing economic weakness in Europe, lower international coal prices, and increasing production in Asia.

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