The U.S. coal industry saw demand drop to its lowest levels since 2002 in the first quarter of the year, while consumer stockpiles climbed to a more than two decade high, according to government data released Tuesday.

The Energy Information Administration in its quarterly coal report provides further evidence of the challenging environment coal producers face amid slumping electricity demand and a sharp drop in steel production.

U.S. coal production fell 6% in the first quarter of the year to 281.4 million short tons from an all-time high of 299.4 million short tons in the fourth-quarter of last year. This is the lowest quarterly production level since mid-2005, as producers rapidly cut output to match weak global demand.

Total coal consumption in the U.S. dropped 6% in the first-quarter compared to the fourth-quarter of 2008, reaching its lowest level since 2002. Declines in consumption combined with existing producer contracts resulted in consumer stockpiles climbing to a more than 22-year high of 184.6 million short tons.

Exports suffered a sharp decline as well, after last year reaching their highest levels since 1981. Exports dropped 40% to 13.3 million short tons during the first quarter, with cutbacks coming from a range of countries.

“While the decreased demand for steel world-wide led to a reduced demand for U.S. metallurgical coal, the decrease in U.S. steam coal exports proved to be even greater,” the EIA said.

U.S. imports also declined falling 30% to 6 million short tons in the first quarter, their lowest since 2004.

One bright spot in the report showed the average delivered price of coal paid by consumers actually increased as producers enjoyed prices set in supply contracts struck in a higher-priced environment.

Find More Mining News :