US domestic coal consumption in 2021 would increase by 5-10% compared with 2019, lending some support to the earnings of the US thermal coal producers, predicted by the global rating agency Moody's Investor Service.
Moody's said the increase in thermal coal demand will also enable US producers to increase their earnings and cash flow, helping some coal companies to reduce debt and some others in transition to metallurgical coal business.
However, even if coal consumption and demand increases, US coal prices are expected to remain weak this year, but low coal prices in the domestic market may drive exports.
Moody's predicted the total US coal production in 2021 will be at 550-575 million short tons (499-522 million tonnes), higher than the previously estimated 525-550 million short tons. However, the agency's estimates are conservative. Previously, the US Energy Information Administration (EIA) predicted that U.S. coal production in 2021 was expected at 581 million short tons.
Moody's also predicted this year's thermal coal consumption in the US power industry will be lower than the 550 million short tons estimated by the EIA, but still higher than the 477 million short tons in 2020. Considering that coal production will increase slightly, Moody's expected some coal mines that have been suspended due to weak market demand in 2020 will not resume production in the short term.
Moody's pointed out that the demand for seaborne thermal coal and coal prices in the Asia-Pacific region have increased in recent months due to the cold winter weather.
As the world's largest importer of thermal coal, China has recently redefined its production target. Moody's expects that it will continue to support seaborne thermal coal demand with its strong economy recovery this year,
China's coal imports from Australia have decreased, which will benefit coal producers in countries such as Indonesia, Russia, Mongolia, and the US.
Moody's predicted US thermal coal exports to increase to 30-35 million tonnes in 2021, which is higher than 27 million tonnes expected by the EIA in 2020. In addition, Moody's pointed out in the global thermal coal trading market, the US will remain a swing supplier.
(Writing by Alex Guo Editing by Emma Yang)
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