Coal News and Markets
Week of July 18, 2004
Coal Prices and Earnings (updated July 20, 2004)
In the trading week ended July16, the average spot coal prices tracked by EIA were all unchanged from the previous week. In the week ended July 9, they had been up, by $1.00 per short ton, in Central Appalachia, and by another $0.50 in the Illinois Basin. In the Powder River Basin, spot coal prices had risen slightly, while in Northern Appalachia and the Uinta Basin the indexed prices were unchanged. Rising prices in the eastern U.S. market reflect continuing short supplies of eastern bituminous coal and pressure on alternative coal supplies.
After holding at $56.00 to $56.50 per short ton during most of May, spot coal prices for premium Central Appalachian compliance coal again surpassed $57.00 in the trading week ended June 4 and established a new high of $59.00 per short ton in the week ended July 9 (see graph below). Medium-Btu Pittsburgh seam bituminous coal, cleaned to less than 3 percent sulfur, plateaued at $46.00 per short ton, f.o.b. rail in Northern Appalachia, during the weeks ended March 12 through April 23. The average spot price retreated to $45.00 per short ton in the week ended April 30, and to $44.50 in the week ended July 2. Coal from the Uinta Basin, an alternate source for low-sulfur bituminous coal, rose to a new high of $27.50 per short ton, f.o.b. rail, in the week ended June 4, then established a $30.00 record price in the week ended July 2. The Illinois Basin coal indexed by EIA has reached new highs each week since the week ended June 25; the most recent new high was the average spot price of $32.75 for the week ended July 9. Although higher in sulfur than Uinta Basin coals, the Illinois Basin coals are geographically closer to Midwestern and Southern consumers and enjoy an advantage in delivered cost due to lower transportation rates.
Defying most expectations during the eastern supply shortage, Powder River Basin (PRB) coals continue to sell at relatively stable prices, the 8,800-Btu coal falling below $6.00 per short ton in the week ended June 25. Major PRB producers seem confident that their product will make new, permanent inroads with traditional eastern coal customers and have set higher production targets for 2004 than in 2003. In the face of rising prices in other supply regions, one explanation of stable PRB prices of late is procrastination among electric power producers that are likely to switch to PRB coal soon, while burning off remaining stocks of eastern coal and convincing stakeholders that the costly conversion to western coal is truly warranted. Another explanation is uncertainty that the rail transportation system, already committed to multi-track “24/7” unit trains traversing the region all year long, can continue to increase annual coal deliveries.
| For the trading week ended July 16 the following average spot coal prices were added: |
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| Central Appalachia (12,500 Btu, 1.2 SO2) | $59.00 per short ton, unchanged |
| North Appalachia (13,00Btu <3.0 SO2) | $44.50 per short ton, unchanged |
| Illinois Basin (11,800 Btu, 5.0 SO2) | $32.75 per short ton, unchanged |
| Powder River Basin (8,800 Btu, 0.8 SO2) | $5.90 per short ton, unchanged |
| Uinta Basin (11,700 Btu, 0.8 SO2) | $30.00 per short ton, unchanged |
With high spot coal prices holding or rising, recent term contract prices are reportedly higher than in recent years for coal in the East, Illinois Basin, and Uinta Basin. Some mines that were temporarily closed or curtailed are coming back on line. High oil prices, signs of a recovering economy, and growing electricity demand set an operating climate with firm price floors and tight coal supplies during the coming months.
Eastern bituminous producers that can perform the additional coal preparation and produce good metallurgical coal are tapping into exceptionally high selling prices in the export market, and also benefiting from relatively favorable U.S. dollar exchange rates. In a break with long-established practice, low-volatile metallurgical coal consumers are now negotiating 2-year or longer contracts in order to lock in some assurance as to future operating costs (U.S. Coal Review, July 12, p.1). Metallurgical coke is made from blends of coals, all of which are bituminous in almost 100 percent of the blends. Low-volatile bituminous coal is a mainstay for many met coke producers (depending on coke-making technology) but it enjoys few other marketing options because, unlike high-volatile bituminous coal, low-volatile bituminous is not usable in most steam-electric boilers. Producers of low-volatile met coal are currently able to sell their product for $75.00 to $80.00 per short ton, f.o.b. mine for the coming 12 months. It is prices at that level that may be driving customers to agree to longer-term agreements in exchange for a break on current spot prices.Coal Production (updated July 12)
EIA estimates coal production of 555.1 million short tons (mmst), through the week ended July 3, 2004. That is roughly 12.7 mmst, or 2.3 percent, ahead of the same period last year. The net increase, however, is almost all attributable to production west of the Mississippi River, which is 12.3 mmst higher, year to date, than in 2003. East of the Mississippi, production has risen during June in response to increased demand with year-to-date production now moving ahead of the same period in 2003 , by 0.4 mmst. The latest monthly production comparisons (see below), for June 2004 versus June 2003, revealed a 5.7 mmst increase, which equates to 6.4 percent more production last month than in June 2003. The compilation of June monthly production estimates also marks the end of the first half of 2004. Estimated coal production for the first 6 months of 2004 totaled 546.3 mmst, which is 12.0 mmst, or 2.6 percent, ahead of the revised production for the first 6 months of 2003.
 Note: This graph is based on revised MSHA coal production survey data for quarters 1 through 4 of 2003, new revisions for quarter 1 of 2004, and preliminary EIA production estimates through May 2004. |
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Contact(s):
Rich Bonskowski
Phone: 202-287-1725
Fax: 202-287-1934
e-mail: Richard BonskowskiBill Watson
Phone: 202-287-1971
Fax: 202-287-1934
e-mail: William Watson