US coal exports to fall in 2013 as economic woes continue - EIA
After a record 2012, US coal exports are expected to decline 12.5% year on year to 98.2m tonnes in 2013, the US Energy Information Administration (EIA) said late on Tuesday.
US coal exports reached a record 112m tonnes in 2012 because of low domestic natural gas prices, which left a great deal of coal produced available for export. However, the EIA now expects that continuing economic weakness in Europe as well as low international coal prices might stem coal exports this year.
In addition, the EIA forecast US 2013 coal production to decline 3.6% year on year to 899m tonnes, from the 932m tonnes produced in 2012. The decline is in line with a projected decline in coal consumption in the electric power sector.
"Lower natural gas prices paid by electric generators led to a significant increase in the share of natural gas-fired generation [in 2012]. Higher natural gas prices, coupled with slightly higher electricity demand, will lead to an increase in coal-fired generation over the forecast period," the administration said in its short-term coal outlook.
In 2012, US domestic coal consumption fell to 752m tonnes, its lowest level since 1992.
Despite a projected decline in this year's total exports, market participants told ICIS earlier this week that a great deal of US coal is currently being offered into Europe. Because Asian appetite for imported high-quality coal remains low - as prices in the three main international coal hubs remain too high for Chinese or Indian buyers - most of the US coal is offered back into the Atlantic market, where demand throughout 2012 has been high because of attractive clean dark spreads.
In contrast to the US electricity market, where cheap gas prices have prompted utilities to switch from coal- to gas-fired generation, German and UK power producers have maximised their coal generation over 2012 because of the high profitability of coal-fired generation.
For example, ICIS data show the UK February '13 clean dark spread out-turned at £23.94/MWh on Tuesday, compared with the equivalent clean spark spread at £1.84/MWh.
The large spread makes it unlikely that power operators would switch from coal- to gas-fired generation. In fact, on Tuesday 8 January, ICIS assessed the indicative medium-efficiency switching level at 37.91p/th - 27.69p/th below the NBP Day-ahead at 65.60p/th.
There is no finite coal-switch price, as this value depends on the efficiencies of coal- and gas-fired plants within a utility's portfolio, as well as the relative costs of gas, coal and carbon.
In theory, once the NBP closes below the coal-switch price, gas-fired generation becomes more economical to operate. MV
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