Category Archives for Marketplace Information
Information on the coal market place.
Peter Keavey, CME Group
Risk management is more important than ever in today’s coal market. Cheap natural gas (NYMEX Henry Hub Natural Gas futures prices remain below $3.00) is competing fiercely with coal in the electricity bid stack. The fight to be the low-cost generator has become even more competitive in recent years, as the efficiency of gas-fired generation has steadily improved, while coal-fueled generation has remained relatively unchanged. Proposed environmental regulations, including the EPA’s newly announced Clean Power Plan, which could lead to wide-scale coal plant retirements, are a major source of uncertainty for the future of the coal industry. While many threats to the coal business are difficult to manage, price risk – arguably the biggest determinant of profitability – can be effectively hedged using futures.
Ed note: This article was originally published in Issue 2, 2015 of American Coal Magazine
By: Mark Gresswell, HDR
If we were to assess the future of the global coal sector from reading the mainstream press, we could safely assume that the last mine was about to close and that draglines and long walls would be museum artifacts within a decade. Thankfully some of us still analyze the fundamentals of commodity markets rather than just push an ideological position, unconstrained by the inconvenience of facts.
On January 28th, 2016, Jason Hayes, Associate Director of the American Coal Council will join Ryan Flynn, Secretary of Environment and the Natural Resources Trustee, State of New Mexico on the US Energy Panel at the 16th Coaltrans USA conference in Miami, FL to discuss “How reliable will the provision of electricity be following the EPA Clean Power Plan?“
The ACC recognizes the importance of an open discussion of key regulatory issues such as these and welcomes the opportunity to meet and network with fellow energy industry professionals.
More information on this event is available on the Coaltrans website.
(Originally published in Issue 2, 2015 American Coal magazine, pg 42)
By: Hans Daniels, Doyle Trading Consultants
The coal industry is in decline. Total coal consumption in the U.S. has fallen rapidly since the high point of 1,128 mm tons was reached in 2007. Last year coal demand fell to 919 mm tons – the lowest point since 1992.
With utility demand accounting for over 90 percent of consumption, the steep decline is primarily due to a reduction in coal-fueled electricity generation. Since 2007, utility coal demand has dropped by 19 percent as inexpensive natural gas and stricter mining and coal-burning regulations have eroded coal’s market share. Other coal consumption sectors have fallen as well:
A new study by Energy Ventures Analysis has found that the EPA’s Clean Power Plan (CPP) will add $214 Billion to wholesale electricity prices by 2030. This is the second study this month that has predicted significant new costs for American energy users as a result of the CPP.
Far from being cost neutral or even cost-free, as the Obama administration has tried to claim, the CPP will have massive, nationwide impacts on electricity prices and system reliability. Among this new study’s findings,
- 45 states will face double digit price increases
- 16 states will have price increases of 25% or more
This Coalhub report forecasts met coal prices will remain low and then “rebalance” between 2017-2019.
The latest quarterly contract settlement of $93/t is expected to shake up the market. Seaborne met. coal exports are forecast to fall this year, due to reductions from US, Australia and Canada.
Chinese import demand is forecast to fall in 2015 and 2016, which will prevent a significant price recovery.
Average unit metallurgical coal costs are projected to fall by an average 19% y/y in 2015. However, further cost reductions will be difficult to achieve.
I continue to receive almost weekly requests from reporters who are asking for comment on California passing a law to force their pension plans to divest from coal. To help speed the process, I prepared a statement on the issue and have reprinted it here for Coalblog readers.
Regarding the issue of California passing SB 185, a law which requires state pension plans (CalPERS and CalSTRS) to divest from their coal holdings.
First off, with noted environmentally-focused investors like George Soros and Tom Clarke investing in coal stocks and coal companies it seems that the state of California may actually be behind the trends on this issue.
Betsy Monseu’s recently published article in the Electricity Journal is freely available via the link below until September 22nd. We encourage everyone to check it out while it is still available.
Coal is under pressure in the United States, and not the natural kind of pressure involved in its creation from plant material. The pressure coal is under today is of a distinctly unnatural kind, shaped by an increasingly far-reaching and unbalanced regulatory agenda. The energy playing field continues to be tilted away from coal, a primary target of that agenda. Yet coal’s leading position as a critical fuel in the electricity marketplace continues. Though its share of that marketplace has generally been trending down over the past several years, coal remains the largest of any fuel source for electric generation. The Energy Information Administration (EIA) forecasts coal to retain the leading position in 2015 as well as over the longer term – including a 34 percent share in 2040.
Editor’s note: I just posted this piece as response to yet another article that plays the tired and cliched “dirty coal” game. It’s time for those of us who support American jobs, as well as affordable, secure, domestic AND clean energy to start speaking up. – We need both clean AND affordable Energy.
Coal can and should play a pivotal role in our energy supply
I was disheartened to see Nithin Coca’s recent article make use of the tired epithet “dirty coal” to attack an energy resource that – despite recent market difficulties – continues to provide this country with almost 40% of its electricity needs. Unfortunately the term “dirty coal” conveniently and simplistically ignores the real-life use of technology that makes coal increasingly clean today.
The American Coal Council welcomes Fredrick (Fred) Palmer as our special guest speaker at the upcoming Coal Market Strategies conference August 10-12, 2015 in Park City, Utah.
Mr. Palmer has been involved with Peabody Energy since 2001, serving for many years as Peabody’s Senior Vice President of Government Relations and most recently as Special Advisor to the Office of the Executive Chairman. As of July 2015, he serves Peabody in a consulting role. Mr. Palmer is a member of the National Coal Council, Executive Committee, and Chairman, Coal Policy Committee.