Washington, 9 April (Argus) — US power companies will use more coal this year and next than previously thought, according to a government report.
Coal consumption will increase to 948.5mn short tons (860.5mn metric tonnes) this year, from 889.3mn st last year, and 957.2mn st in 2014, the Energy Information Administration (EIA) said today in its monthly Short-Term Energy Outlook. The agency estimated last month that generators would use 940.6mn st in 2013 and 954.6mn st the following year.
This is the third straight month that EIA has boosted its forecasts for 2013 and 2014 coal use. The consumption outlook for this year is now 4pc above the agency's forecast in January, while 2014 estimates are 3.2pc higher.
EIA raised its expectations for total electricity sales and generation this month. But the primary reason it has been revising its coal outlook higher this year is the increase in natural gas prices after last year's near-record lows. Electric utilities will spend an average $4.31/mmBtu this year burning natural gas, compared with $3.39/mmBtu in 2012.
In contrast, the cost of burning coal will inch up by only a penny, to $2.41/mmBtu, EIA estimates.
Thanks to the greater cost advantage, coal's share of electricity generation will rise to 39.9pc in 2013 from 37.4pc last year, EIA said. Natural gas will drop to 28pc from 30.4pc. The agency raised its forecast for electric output from coal by 1.4pc and said it will be 7.8pc higher than in 2012.
EIA also lowered its forecast for coal inventories for a second straight month. Secondary stockpiles will fall to 191.6mn st at the end of the year from 192.7mn st in 2012. Coal held at electric power companies will decrease to 183.3mn st from 184.9mn st. Agency estimates in March put those figures at 192.6mn st and 184.3mn st, respectively, and they were 193.4mn st and 185mn st in February.
The amount of inventory producers hold at the mine is expected to fall to 44mn st this year, from 47.4mn st in 2012. EIA has not changed that projection all year.
But the benefit to production from increased use and lower customer inventories will not be as great as previously thought because economic weakness in Europe and falling international coal prices are inhibiting US coal exports. The US will produce 1.025mn st of coal this year, according to EIA. That is 0.5pc more than in 2012 but 0.5pc lower than March's forecast of 1.03mn st.
The agency lowered its forecast for 2013 coal exports to 106.7mn
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