US utilities cautious on coal; stockpiles falling: consultant

Tucson, Arizona (Platts)--7Oct2010/531 pm EDT/2131 GMT

US utilities at this time are "more hesitant than ever to burn coal," Wood Mackenzie coal consultant Ben Hewson said Wednesday at the American Coal Council's Coal Market Strategies conference in Tucson, Arizona. Following recent announcements of retirements and facility idling from American Electric Power and the Tennessee Valley Authority, Hewson said he continues to expect "significant more retirement decisions" coming in future years. In September, AEP announced plans to retire 5,000 MW of its coal-fired fleet by 2017 and operate about 1,925 MW of its older, inefficient coal-fired units only during peak demand times in response to upcoming environmental regulations and cheap gas. In late August, TVA said it would shut nine coal-fired units at three of its steam plants by 2015, in keeping with plans announced August 20 to idle 1,000 MW of older coal-fired capacity for environmental and economic reasons. Hewson projected total US thermal coal demand at 990 million st for 2010, an increase of 6.5% from 2009. Hot summer temperatures provided support for these figures, with summer burns in 2010 8% ahead of prior-year figures, he said. The Wood Mackenzie analysis put current US utility coal stockpiles at approximately 144 million st, with projections of storage hovering near the 50-day range through 2011. Hewson stated that reduced stockpiles, another effect of high summer burns, should lend support to coal prices "as the market is no longer saturated." Reductions to utility stockpile levels will be checked, over the long-term, by coal-fired unit retirements, and continued encroachments of natural gas into the generation portfolio. Looking at individual coal products, Hewson said that after a high summer demand, stockpiles of Illinois Basin and Central Appalachia coal should have returned to historical averages, with the possibility of CAPP falling to 40 days supply in 2011. IB supplies towards the end of 2010 could come under pressure due to the inability of supply to meet demand, but supplies are projected to increase into 2011. In Powder River Basin coal stockpiles, utility holdings are currently seen at 35 to 40 days, with 2011 averages at 50 days. He added 2011 stockpiles could fall back to 45 days by the end of 2011, but said Eastern plants would maintain higher stockpiles due to transportation costs and times. Similar stories appear in Coal Outlook.

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