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EIA forecasts US coal production will fall 24% below 2019 levels this year

Coal production was forecast to fall 24.3% in the U.S. Energy Information Administration's latest "Short-Term Energy Outlook."

Coal plants are expected to bear the brunt of a decline in overall electricity demand. Combined with persistently low natural gas prices, the lower demand is expected to drive 2020 average coal consumption to 453 million tons, down 23.9% compared to 2019 levels.

"However, EIA forecasts that coal consumption will rise in 2021 because of a general economic recovery that will increase overall electricity generation and an expected increase in natural gas prices that will cause some coal-fired generation units to become more economic to dispatch. Secondary stocks (at power plants) remain high, and even with decreased production, coal plants do not expect shortfalls in the next few months," the EIA wrote May 12.

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U.S. coal production is now expected to total 522.6 million tons in 2020, down 24.3% from 2019. Coal production in 2020 will be 30.8% lower than 2018 levels, according to the forecast. The EIA projected that annual coal production will bounce back to about 549.6 million tons in 2021.

"Some large producers have stipulated that their mines will be shut down or idled for periods ranging from 14 to 30 days, while others have not implied a date to resume normal operations," the EIA wrote. "EIA expects that these decreases in overall production will have a noticeable effect on supply, contributing to a steeper decline than would have occurred had these measures not been put into place."

The outlook for coal generation and production are slightly lower than the agency's April estimates. Steve Winberg, assistant secretary for fossil energy at the U.S. Department of Energy and former Consol Energy Inc. executive, recently suggested in remarks at an industry conference that there could be early coal plant retirements due to the coronavirus.

Coal exports, which dropped from 115.6 million tons to 92.9 million tons from 2018 to 2019, are expected to drop to 63.2 million tons in 2020. The EIA forecast that coal exports will grow to 70.5 million tons in 2021.

"Atlantic markets, which are the primary outlet for U.S. coal exports, are showing considerably decreased demand because of the global economic slowdown," the EIA wrote. "COVID-19 related lockdowns affecting large seaborne market suppliers, including Colombia and Indonesia, have stifled global supply, providing some support to international prices but not enough to overcome the overarching shortfalls in demand."

The EIA said "uncertainties persist" across its outlook, particularly in light of the unknown impacts of the COVID-19 pandemic.