Coal production in the first quarter lowest since 1981

June 13, 2016

According to the U.S. Energy Information Administration (EIA) coal production in the first three of months of 2016 was the lowest quarterly production for the United States since the second quarter of 1981.

The EIA reported that the United States produced just (173 million st) in the first quarter of the year. Among the supply regions, coal production from the Powder River Basin in Montana and Wyoming declined the most in tonnage and percentage since the previous quarter.

Low coal prices continued to impact the sector. Electricity generation accounts for more than 90 percent of domestic coal use. In addition to complying with environmental regulations and adapting to slower growth in electricity demand, coal-fired generators also are competing with renewables and with natural gas-fired electricity generation during a time of historically low natural gas prices.

A 17 percent decrease in coal production from the previous quarter marked the largest quarter-over-quarter decline since the fourth quarter of 1984. Above-normal temperatures during the winter of 2015–2016 were a key reason for the large decrease in coal production during the first three months of 2016. Throughout the fourth quarter of 2015, electric power plants received more coal than they consumed, leading to a net increase of 34 million st in coal stockpiles, the highest fourth-quarter net increase on record.

High coal inventories encouraged electric power plants to consume coal from their stockpiles in the beginning of 2016, resulting in lower new coal orders. Decreases in coal purchases have reduced overall coal rail traffic because most producers ship coal by rail. Based on data from the American Association of Railroads, coal carloads in the first three months of 2016 were about 20 percent lower than in the final three months of 2015.

Regionally, production from the Powder River Basin (PRB) decreased the most between the fourth quarter of 2015 and the first quarter of 2016. First-quarter coal production of 69 million st from the PRB was the lowest level since the second quarter of 1995.

The decline in coal demand is not limited to any geographic region. Texas, Michigan, Illinois, and Oklahoma accounted for an average quarterly demand of 37 million st of PRB coal in 2015, or about 40 percent of the total PRB coal market. Demand for PRB coal in these four states fell to 19 million st in the first quarter of 2016.



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