Industry Trend Analysis - Coal: Long-Term Decline - FEB 2015

BMI View: Rising natural gas-fired electricity generation and increasing regulatory headwinds will both contribute to declining coal consumption and production in the coming years. Moreover, global seaborne supply of both metallurgical and thermal coal will remain ample in the quarters ahead, leaving prices subdued. US coal production will therefore decline 0.5% on average per annum in 2015-2019, with total production of 886mnt in 2019.

The US will remain the second-largest consumer and producer of coal globally through to 2020, yet we forecast average annual coal production will decline 0.5% in 2015-2019 following modest output growth in 2014. Over 90% of coal produced and consumed in the US is of the thermal variety. Thus a surge in gas-fired capacity, the introduction of Mercury and Air Toxics Standards (MATs) in 2015/2016, and the impending regulations on carbon emissions from existing power plants introduced by the Environmental Protection Agency (EPA) will all ensure production levels do not return to the highs of the previous decade and that coal's share of total electricity generation declines over our forecast period. Nevertheless, we expect thermal coal will remain an important part of the US energy mix given rising Henry Hub natural gas prices through the decade, the US's ample coal reserves, and significant coal-fired electricity infrastructure.

Sector Consolidation To Limit New Supply

Changing Generation Patterns
US Total Electricity Generation, By Type (TWH), 2013-2022

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