2004: A Good 
Year for Coal

By: Bill Reid
Managing Editor


    2004 will be a very good year for the coal industry, according to the National Mining Association 2004 Coal Forecast, which was presented at the NMA Media Briefing held recently at its headquarters 101 Constitution Avenue NW, Washington, D.C which included the Wall Street Journal and numerous major trade publications.
    The forecast says that coal production is expected to total 1.115 billion tons in 2004, 3.5% more than in 2003 and second in volume only to the record 1.127 billion tons produced in 2001. Production in the east will begin to recover from the 2003 downturn due to an increase in the demand for export coal and for coal for utilities generally served by eastern coal fields. Product-ion in the western part of the country will grow at a faster rate than has been experienced in the past two years, again due to an increase in demand for coal for the generation of electricity. 
    Total use of coal including coal for exports will reach 1.156 billion tons, 13 million tons over the previous record demand of 1.143 billion tons that occurred in 2000. The difference between demand for coal use and coal production will be met through a further drawdown in stockpiles and with approximately 24 million tons of imported coal.
    Coal production levels are driven by demand for coal to generate electricity, says the forecast. Electric generators are expected to use 1.014 billion tons of coal in 2004 to produce approximately 52.5% of the electricity that is made available for sale through the grid. Commercial and industrial consumers will use another 30 million tons of coal to generate electricity for their own use. Coal use for electricity is expected to be 2.3% more in 2004 than last year.
    Steel mills will use another 23.7 million tons to produce coke and 35 million tons of coal will be used for industrial (non-electric) purposes. The use of coal for coke is down slightly from 2003 levels because steel production is not expected to increase in 2004 and because the percentage of steel produced in electric (non-coke using) furnaces, now nearly 50%, will continue to increase.
    For the first year since 1996, exports of coal are expected to increase. Shipments of both metallurgical and steam coal to Europe are expected to be higher in 2004 due in part to the weak dollar (which makes U.S. exports less expensive on the international market) and in part to high ocean freight rates that are expected to continue at higher levels throughout the year.

The forecast says there are several reasons for the optimistic outlook for coal in 2004: 
Economic growth as measured by real GDP is expected by most analysts to be at least 4% year on year in 2004. (The increase was an estimated 3.0% in 2003). Much of this growth is likely to be in the manufacturing sector and in regions in the country that are more dependant on coal fired electricity.
Electricity demand itself is expected to increase by 2.5% in 2004, versus a relatively weak 1.0% increase in 2003. Most of this increase in electricity will be produced by coal.
Generation and nuclear plants may increase slightly in 2004 but there is little opportunity to obtain more electricity from oil fired peaking plants or from hydro-electric generating stations that were running at almost top capacity in 2004.
The NMA forecast is based on an expected increase in the demand for coal fired electricity to take the place of electricity produced from higher cost natural gas. 
Department of Energy forecasts predict that the price of natural gas at the utility plant will average $5.30/mcf in 2004. On January 9, 2004, the closing NYMEX future prices for delivery in February and March were above $7.00/mcf and for delivery through July prices remained above $5.50. 

This article is protected by United States copyright and other intellectual property laws. The article may not be reproduced, rewritten, distributed, redisseminated, transmitted, displayed, published or broadcast, directly or indirectly, in any medium without the prior permission of Coal Leader, Inc. Copyright 2004, Coal Leader, Inc. All rights reserved.