Crude oil’s drop back into…
A recent report from Platts…
Wyoming coal production dropped by 3.3% in 2013, the fourth consecutive year of decline. Bad weather, including a lot of rain, contributed to a cut back in operations. The state also lost over 300 coal jobs as a result. Despite the setback, the Wyoming coal industry expressed enthusiasm for 2014, pointing to higher demand from cold weather and an increase in natural gas prices.
Wyoming still accounts for over 40% of the nation’s total coal production. But rain forced slowed down production at many surface mines in 2013. Also, coal companies using rail to ship coal have had to deal with a new obstacle that didn’t exist in the past: increased rail traffic from oil. U.S. oil consumption is way up from a few years ago, and with pipeline constraints, oil companies are shipping a major portion of production by rail. This has increased the cost and time for the coal industry to ship its product to market. Altogether, Wyoming coal production declined from 401 million tons in 2012 to 388 tons in 2013.
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As a result, Powder River Basin coal prices have increased a bit, from $10.15 per ton in January 2013 to $12.35 per ton in January 2014. That is still much lower than coal from the Appalachian basin, which runs from $64 to $68 per ton.
Still, the coal industry may reverse its decline in 2014. Coal stockpiles have disappeared at a faster clip than at any time in the past decade due to cold weather and higher natural gas prices. The East Coast is dealing with record cold temperatures, and with consumers using more energy to stay warm, natural gas prices have rapidly increased. This has many utilities turning back to coal. After burning through stockpiles, utilities will be forced to purchase more coal from producers in Wyoming.
By Joao Peixe
Joao is a writer for Oilprice.com