Summary
Domestic thermal coal demand is likely to continue to be down for several more months, with nothing positive on the immediate-horizon.
Analysis
Many factors will cause a grim outlook for thermal coal demand the next several months, affecting the coal producers and transportation provides:
*Economic recession and the resultant electricity demand destruction hitting some industrial demand by 20% in some utility regions.
*Low natural gas prices are causing a tremendous amount of coal-to-gas switching due to the economic advantage of generating on gas over coal on a replacement cost basis.
*Annual requirement beginning in 2009 in the Eastern United States under the reinstated Clean Air Interstate Rule to have NOx emissions credits that increase the generating costs of coal-fired generation. Further adding to the generating costs on coal is the requirement for seasonal NOx allowances in the Eastern United States under the reinstated Clean Air Interstate Rule beginning May 1, 2009.
*Upcoming shoulder seasons with the combination of lower heat/air conditioning demand, available efficient natural gas units, and the corresponding low natural gas prices.
*Scrubber retrofits on coal plants that are taking coal units out for extended outages to complete the capital projects.
