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Hazloc Heaters

U.S. Coal Production Hits a 16-Month High Thanks to Costly Gas

Dec 28, 2018 by Jim Efstathiou Jr.

Cold weather and a hot natural gas market helped drive U.S. coal production to the highest in 16 months.

Output rose to an estimated 15.9 million short tons in the week ending Dec. 22, the U.S. Energy Information Administration said Thursday. That’s the highest since Aug. 25, 2017. The amount of coal shipped by rail, which closely tracks production, reached the highest since Sept. 1, 2017.

Coal’s comeback comes at the expense of gas, which has been surging in price. After averaging about $3 per million British thermal units in 2017, prices climbed to more than $4.80 in November and have mostly hovered between $3.50 and $4.50 this month.

While total electricity generation rose by about 8 percent in November and December, power from gas fell by about 7 percent, Barclays analysts Samuel Phillips and Michael Cohen wrote in a report this week.

With higher gas prices, “preliminary data suggests a pickup in both coal demand (from gas to coal switching) and supply,” Jeremy Sussman, an analyst at Clarksons Platou Securities, said in an email. Coal’s largest gains over gas were in the Midwest, Southeast and Southwest.

Still, Sussman expects gas prices to come down next year. And the recent uptick in coal demand probably won’t upset the long-term trend that has gas displacing coal at power plants.

The EIA expects the share of power generation from gas to reach 35 percent in 2018 and 2019, up from 32 percent last year. Meanwhile, coal will produce about 28 percent of U.S. electricity in 2018 and 26 percent in 2019, down from 30 percent last year.

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