* Spread between coal and gas prices below $1 mmBtu
* Generators to shut over 40,000 MW of coal plants
By Scott DiSavino
Feb 11 A recent increase in U.S. coal prices and
a slight decline in natural gas are set to dent demand for coal
as utilities use more gas to generate power, electricity traders
said on Monday.
Prices of Central Appalachian coal have climbed to their
highest levels since mid-December as prices and demand for coal
remain strong in foreign markets and U.S. miners look to export
more of their product.
Meanwhile, natural gas prices have declined to their lowest
levels since late January, due in part to continued high
inventories from record shale production and still mild
end-of-winter weather forecasts. See
The relative price difference between NYMEX Central
Appalachian coal and NYMEX Henry Hub gas has
narrowed to less than $1 per million British thermal units
(mmBtu) for the first time since early January, according to
Natural gas traded at $3.22 per mmBtu Monday morning, while
Eastern coal was selling for about $2.25 per mmBtu.
Energy traders however noted it costs about $1 per mmBtu to
transport Eastern coal and an additional 50 to 75 cents per
mmBtu to operate less efficient coal plants at current coal
So when natural gas prices are less than $1.50 to $1.75 over
coal, it's an easier decision for generators to burn gas rather
than coal to produce power, according to traders.
In early 2012, a mild winter left a huge amount of gas in
inventory, and record-high shale production pushed gas prices in
April to 10-year lows, luring power companies away from coal in
That is why U.S. generators since 2009 have announced plans
to shut more than 40,000 megawatts(MW) of coal-fired capacity
over the next several years.
The weak gas prices have depressed power prices, making it
uneconomic for generators to invest in emission control
equipment needed to keep older coal plants compliant with
stricter environmental rules.
Natural gas has been historically more expensive than coal,
but in April 2012 gas traded at a 10-year low of $1.90 per mmBtu
due to oversupply while coal fetched about $2.12 per mmBtu. That
22-cent gap had not been seen since at least 2001, according to
As gas prices rebounded, surpassing coal, the spread between
gas and Eastern coal widened to more than $1, making gas less of
a bargain. But now, the spread has fallen to less than $1.
The biggest U.S. coal-fired power companies include units of
American Electric Power Co Inc, Duke Energy Corp
, Tennessee Valley Authority, Southern Co, Xcel
Energy Inc, NRG Energy Inc and FirstEnergy Corp