January 10, 2019 Read More →

S&P: Like utilities, smaller coal consumers also seeking other options

S&P Global Market Intelligence ($):

Coal consumption by U.S. commercial and institutional customers and other industrial sectors has been sharply declining in recent years, echoing a drop in overall demand for thermal coal.

Industrial customers and places such as universities and hospitals that burn coal to create their own heat and power are relatively small market segments, especially compared to the 665 million tons consumed by the electric power sector in the U.S. in 2017. The U.S. Energy Information Administration reported just 1.1 million tons of coal were consumed by commercial and institutional customers in 2017 while 33.3 million tons were consumed by “other industrial sectors.” That category excludes cokemaking facilities, which buy a high-quality, higher-margin grade of metallurgical coal used to make steel.

Those two slivers of the U.S. coal market are on a trajectory of decline similar to the fall in overall thermal coal demand. Where the metallurgical coal market is exposed to volatile ups and downs based on global demand, other industrial, commercial and institutional coal consumers are subject to a market where environmental pressure, alternative fuel sources and the state of the economy have reduced the appeal of coal.

In 2001, other industrial sector consumers used 65.3 million tons of coal to fire boilers across an array of industries that require large sources of heat or power to run their own operations. That number fell by nearly half in 2017, and the trend appears to have continued in 2018. In the first three quarters of 2018, the non-cokemaking industrial sector consumed 23.3 million tons of coal, down from 24.9 million tons of coal in the same period the year before.

Commercial and institutional coal customers in the U.S. consumed about 5.1 million tons of coal in 2004, the highest level since the start of this century. Since then, the segment’s coal consumption has plunged, falling 79.3% by 2017 to 1.1 million tons. That figure was likely even lower in 2018, as the most recent EIA data shows 720,000 tons of consumption from that customer group in the first three quarters of the year compared to 771,000 tons in the first three quarters of 2017.

More ($): Not just power: U.S. coal consumption in smaller domestic markets also shrinking

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