Coal industry members forecast more challenges in 2023

  • Wednesday, December 14, 2022
  • Source:ferro-alloys.com

  • Keywords:Coal industry
[Fellow]Railroads have been trying to address the persistent delays by hiring more people and making other adjustments.

[Ferro-Alloys.com]

The thermal coal industry will continue to face a number of economic and environmental challenges in 2023, according to participants at an American Coal Council (ACC) conference.
 
The coal industry had a reprieve in some of 2021 and 2022 from fairly consistent downturns, prompted an increase in coal demand and prices. Against this backdrop, US coal producers expanded output and in some cases reactivated dormant mines or added reserves to mines that were previously scheduled to close. This may not continue in 2023, some conference attendees said.
 
"We're still projecting US domestic coal production to actually decrease in 2023 versus 2022," Consol Energy senior vice president of strategy Dan Connell said, referencing US Energy Information Administration projections.
 
Most of the mine reactivations have been in Central Appalachia and production gains have been limited and largely a result of some metallurgical coal being processed and sold as steam coal, said Andrew Blumenfeld, data analytics director at McCloskey by OPIS.
 
Other basins have also had supply increases. US coal production was 5.3pc higher in September than it had been a year earlier.
 
But US coal-fired generation has declined most of this year as fewer coal plants were operating and those facilities that were still in existence faced transportation issues that forced some to curb coal use.
 
Railroads have been trying to address the persistent delays by hiring more people and making other adjustments.
 
"We've had to use some discipline in making sure that as we added additional sets, that we didn't make our problem worse," BNSF general director of coal marketing Matthew White said.
 
BNSF hopes to improve rail cycle times and move more coal in 2023 than it has this year, White said.
 
Blumenfeld said that if railroad transportation becomes more reliable next year, utilities may cease coal conservation and increase consumption of existing coal inventories once again.
 
But more coal-fired power plant retirements are on the horizon as operators work to comply with federal regulations rolled out over the past 10 years. Recent legislation signed into law by President Joe Biden, including the Inflation Reduction Act, could bring on more retirement announcements as well, conference attendees said.
 
As the domestic market declines, international markets will likely play a more prominent role in the fate of US coal production. An historic high of roughly 16pc of US coal production is now getting exported, according to Blumenfeld.
 
In addition, US Army Corps of Engineers projects to deepen channels around ports in the Gulf and East coasts could allow larger ships to call on some of the coal terminals in those regions, Blumenfeld said.
 
But producers are dubious of relying too heavily on the export market.
 
"There's absolutely going to be a lot of international space," Navajo Transitional Energy Company vice president Matthew Adams said. But various factors — including limited US West coast terminal capacity, Canada's decision to stop exporting coal in 2030 and country commitments made during UN climate talks, could limit US producers' abilities to participate in seaborne markets.
 
In addition, while buyers in a number of countries that previously had not been interested in US coal have been making inquiries, the deals tend to have shorter terms, said Alliance Resource Partners vice president of sales Jared Griffith.
 
"I think the longest long-term export customer I've ever had was maybe a year and a half," Griffith said. That is less attractive for US coal producers when looking at production projects for coming years.

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