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Coal supplies at power plants fall in cold weather

World Coal,

The average supply of coal held at electric power plants in December 2013 dropped below 60 days of burn for the first time since summer 2011, according to data from the US Energy Information Administration (EIA).

Inventory increased slightly in January, however currently remains below a two-month supply. Coal consumption for electricity generation grew during summer and autumn 2013, as the price of natural gas increased. Consumption of coal increased further this winter, due to cold weather across the US that drove up power demand.

As coal’s share of the energy mix increased, operators of coal-fired plants drew down inventory levels that had grown unusually high in late 2012 and early 2013. Receipts of new coal supplies at electric power plants were generally below the five-year range throughout 2013 (see graph below), leading to low inventory heading into this spring.

Over 80% of coal used by electric generators is purchased under multiyear contracts, which give buyers limited options for adjusting delivery volumes. The main avenue buyers have in reacting to short-term market developments is to replace expiring multiyear contracts with shorter-term spot coal supplies. This strategy gives generators more control over the rate of receipts. As shown below, the percent of coal receipts purchased on spot contracts rose throughout 2013.

Adapted from press release by Katie Woodward

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