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Coal

US coal production forecast to decline 17% in Q4: EIA

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Moody's sees negative 2020 US thermal coal outlook on smaller stack share, lower exports

US coal production forecast to decline 17% in Q4: EIA

Highlights

2020 coal production forecast to total 603 million st

Spot Henry Hub forecast to average $2.52/MMBtu in 2020

Houston — The US Energy Information Administration is forecasting a 17% decline in fourth-quarter coal production from the year-ago period, according to the agency's monthly Short-Term Energy Outlook.

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The report, issued Tuesday, forecasts total US coal production to sink to 159 million st in the final three months of the year, a decline of 34 million st from the fourth quarter 2018. Declining coal demand, bankruptcies, ownership changes and mine closures have "contributed to a fluctuating production environment" in the western coal region, especially in the Powder River Basin, according to the report.

This year's coal production is expected to total 679.3 million st, an increase from the administration's September projection of 673.9 million st. But the administration's 2020 production outlook fell to 603 million st, down from last month's projection of 617.3 million st.

For 2019, Western coal producers are forecast to see the largest percentage decrease in YoY output, down 11.6% to 369.7 million st. Miners in the Interior region are expected to produce 8.5% less coal, totaling 125.5 million st, and Appalachian producers are expected to see a 7.9% drop to 184.2 million st.

The agency's projection for coal exports in 2020 dropped 12% from September, to 75 million st, a reduction of 10 million st, due to declining demand in the Atlantic Basin, a surplus of Eastern European coal supply and lack of West Coast coal terminal capacity to reach the Asian markets. This year, it expects US producers to export 91.8 million st of coal. The US exported 116 million st in 2018.

Thermal coal exports are expected to see the most significant percentage decrease this year, dropping by 24.6% year over year to 40.8 million st, while metallurgical exports are down 17.1% to 51 million st. In 2020, coking coal exports are projected to decline by 17.8% to 41.9 million st, while thermal exports drop 17.6% to 33.6 million st.

Coal consumption is expected to drop to 596 million st this year and then further to 544 million st in 2020, and is expected to make up 25% of US power generation in 2019 and 22% in 2020.

The agency forecasts the spot Henry Hub physical price to average $2.43/MMBtu during the fourth quarter of this year, and $2.52/MMBtu in 2020. In addition, dry gas production is forecast to average 93.5 Bcf/d compared with 91.6 Bcf/d in 2019.

-- Andrew Moore with Ellie Potter, S&P Global Market Intelligence, newsdesk@spglobal.com

-- Edited by Andrew Moore, newsdesk@spglobal.com

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