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Four encouraging signs from the US coal industry

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World Coal,

Despite recording a higher-than-expected loss in Q1 2014, Peabody Energy noted a number of bright spots in the US coal outlook.

Four reasons to be positive

  1. Coal generation rose 9% through March on higher utilization and continued gas-to-coal switching, Peabody said. Winter heating degree days were 15% higher in coal heavy regions and Peabody now projects 2014 US coal demand will grow by 35 to 45 million short t over 2013 levels.
  2. US stockpiles declined by over 50 million short t in the last 12 months to an estimated 120 million short t in March, the lowest levels since 2006. southern Powder River Basin (PRB) inventories stand at 44 days, below normal levels and less than half of the recent peak in April 2012.
  3. Prompt month southern PRB prices have risen 30% over the last six months and are the highest in more than two years. Utility purchasing is expected to increase in response to greater coal demand and lower contracted volumes.
  4. Southern PRB and Illinois Basin coal demand is expected to grow 100 million short t by 2016 on growing utilisation and basin switching.

Coal still needde for reliable, low-cost baseload power

“We have seen a substantial increase in US coal demand, and coal generation is now nearly twice that of natural gas," said Gregory Boyce, Peabody’s chairman and CEO, in the company’s earnings statement. "Rising coal utilisation, higher natural gas prices and reduced shipments resulted in the largest stockpile withdraw in 36 years. The cold winter and spikes in natural gas prices again highlight the need for low-cost, reliable, baseload coal plants in the US generation mix."

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