Coal - Future Trends In The Coal Industry

In Annual Energy Outlook 2004 the EIA forecasted that domestic coal production will increase to almost 1.3 billion short tons by 2015 and increase slightly from there to almost 1.4 billion short tons by 2020 and approximately 1.5 billion short tons by 2025. (See Table 4.5.) Domestic consumption is projected to match production, reaching nearly 1.3 billion short tons in 2015, almost 1.4 billion short tons by 2020, and approximately 1.5 billion short tons by 2025. Electricity generation will still use the majority of coal in 2015 (approximately 1.2 billion short tons), 2020, and 2025. Total coal consumption for electricity generation is expected to increase by an average of 1.8% per year because of high natural gas prices.

Coal prices are projected to decline from $17.90 per short ton in 2002 (see Table 4.5) to a low of $16.19 per short ton in 2016. These price decreases will likely occur because of improvements in mine productivity, a shift to western production, declines in rail transportation costs, and competitive pressures on labor costs. After 2016 prices will likely rise as productivity improvements slow and the industry faces increasing costs to open new mining areas. By 2025 the price of coal is projected to rise to $16.57 per short ton. (See Table 4.5.) Nevertheless, this price is still below the 2002 price.

Environmental concerns about acid rain and global warming may continue to grow. The outlook for the U.S. coal industry could be affected by acid rain legislation, the development of clean coal technologies, and, over the longer term, the problem of global warming. Environmental issues will increasingly become international problems. China, with nearly five times the population of the United States and a growing economy, may surpass the United States in carbon emissions by 2020.

The EIA predicts that U.S. coal exports will decline from 6% in 2002 to less than 3% in 2025. This decline will likely be the result of a decline in the demand for coal in Europe and the Americas. Also, other countries are expected to reduce costs and gain currency exchange advantages against the U.S. dollar.

TABLE 4.5

Comparison of coal forecasts, 2015, 2020, and 2025
(Million short tons, except where noted)
		AEO2004			Other forecasts
Projection	2002	Reference	Low economic growth	High economic growth	EVA	Hill & Associates
1The average coal price is a weighted average of the projected spot market FOB mine price for all domestic coal.
2The minemouth price represents an average for domestics team coal only. Exports and coking coal are not included in the average.
3The prices provided by Hill & Associates were converted from 2003 dollars to 2002 dollars in order to be consistent with AEO 2004.
Btu = British thermal unit.
NA = Not available.
SOURCE: "Table 33. Comparison of Coal Forecasts, 2015, 2020, and 2025 (Million Short Tons, except Where Noted)," in Annual Energy Outlook 2004, U.S. Department of Energy, Energy Information Administration, Office of Integrated Analysis and Forecasting, January 2004, http://tonto.eia.doe.gov/FTPROOT/forecasting/0383(2004).pdf (accessed November 16, 2004)
	2015
Production	1,105	1,285	1,262	1,288	1,114	1,204
Consumption by sector
Electricity generation	976	1,200	1,180	1,200	1,042	1,144
Coking plants	23	21	21	21	18	18
Industrial/other	67	70	67	73	60	62
Total	1,066	1,291	1,269	1,295	1,120	1,224
Net coal exports	22.7	−6.1	−6.1	−6.1	−6.2	−20.4
Exports	39.6	31.6	31.6	31.6	29.5	28.4
Imports	16.9	37.7	37.7	37.7	35.7	48.8
Minemouth price
(2002 dollars per short ton)	17.90	16.47	15.84	16.75	17.021	17.782,3
(2002 dollars per million Btu)	0.87	0.81	0.78	0.82	0.831	0.812,3
Average delivered price to electricity generators
(2002 dollars per short ton)	25.96	24.34	23.17	25.10	NA	21.823
(2002 dollars per million Btu)	1.26	1.22	1.16	1.25	NA	1.083
	2020
Production	1,105	1,377	1,337	1,382	1,159	1,208
Consumption by sector
Electricity generation	976	1,301	1,263	1,305	1,095	1,158
Coking plants	23	19	19	19	17	17
Industrial/other	67	71	68	75	57	59
Total	1,066	1,391	1,349	1,399	1,169	1,234
Net coal exports	22.7	−14.4	−12.2	−15.7	−10.4	−25.6
Exports	39.6	27.4	29.5	26.0	29.7	22.6
Imports	16.9	41.7	41.7	41.7	40.1	48.2
Minemouth price
(2002 dollars per short ton)	17.90	16.32	15.78	16.92	16.911	16.942,3
(2002 dollars per million Btu)	0.87	0.80	0.78	0.83	0.831	0.772,3
Average delivered price to electricity generators
(2002 dollars per short ton)	25.96	24.01	22.87	25.03	NA	21.083
(2002 dollars per million Btu)	1.26	1.20	1.15	1.24	NA	1.043
	2025
Production	1,105	1,543	1,420	1,586	1,237	NA
Consumption by sector
Electricity generation	976	1,477	1,355	1,510	1,184	NA
Coking plants	23	17	17	17	16	NA
Industrial/other	67	72	68	84	55	NA
Total	1,066	1,567	1,441	1,612	1,254	NA
Net coal exports	22.7	−22.7	−19.8	−24.8	−17.8	NA
Exports	39.6	23.0	26.0	21.0	30.0	NA
Imports	16.9	45.7	45.7	45.7	47.8	NA
Minemouth price
(2002 dollars per short ton)	17.90	16.57	15.67	17.95	16.971	NA
(2002 dollars per million Btu)	0.87	0.82	0.78	0.88	0.841	NA
Average delivered price to electricity
generators
(2002 dollars per short ton)	25.96	24.31	22.75	26.29	NA	NA
(2002 dollars per million Btu)	1.26	1.22	1.14	1.30	NA	NA