US coal production response may stay limited: NTEC

US coal supply likely will remain tight through the end of this year, with demand continuing to outpace availability, the Navajo Transitional Energy Company (NTEC) said.

US power plant coal stockpiles have fallen from 2020 levels, and coal demand has risen, amid higher natural gas prices and the economic recovery following the initial stages of the Covid-19 pandemic last year. Export demand and prices have also increased.

NTEC, which owns mines in the western US as well as a stake in the Four Corners power plant, expects elevated demand to continue through the winter, NTEC chief executive Clark Moseley told attendees of the National Coal Transportation Association conference in Scottsdale, Arizona, on 21 September. But production, which has increased at a less robust rate than demand, will remain limited by labor, equipment and materials shortages, he said.

"It is going to be a tough season coming up," given elevated natural gas prices, producers' limited ability to ramp up production and low power plant stockpiles, Moseley said. He urged utilities to share longer-term forecasts for coal consumption so producers can figure out how to adequately deploy capital and have production match demand.

NTEC's mines are sold out for 2021 despite having "stretched the mines considerably" and increasing capacity beyond what the company had planned for this year, Moseley said.

The company expects its Powder River basin and New Mexico mines to produce around 52mn st in 2021. That would be 8.5mn short tons (st) more than in 2020 and slightly under 2019's output for the properties, according to US Mine Safety and Health Administration data.

Meanwhile, natural gas supply will remain tight as strong demand and prices pull US LNG out of domestic markets and in to Europe and Asia, Moseley said. The US is currently shipping 5-10 Bcf/d more LNG this year than in previous years, he said. At the same time, US natural gas storage is 7pc below average "and will be challenged to recover for winter demand." That will keep gas prices elevated and the window open for domestic and international coal consumption in coming months.

NTEC said dark spreads in South Korea and Japan, the company's two biggest international markets, have increased to favor coal-fired generation.

NTEC's Spring Creek mine in Montana will export more than 5mn st of coal this year, a record for the property, amid an increase in demand and pricing in both the Pacific and Atlantic markets, the company said.

"The last nine months, NTEC has seen record prices in the thermal coal export market," Moseley said. "It is going to be difficult to predict the end of it, but, I think, that cycle is going to run for another couple more years."

By Elena Vasilyeva