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Two reported Central Appalachia thermal coal deals push prices down

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Source: Pexels, May 27, 2019

Two trades for Central Appalachia thermal coal were reported to S&P Global Platts this week, which pushed prices to even lower levels.



On Tuesday, in the US over-the-counter thermal coal market, a broker reported a 12,500 Btu/lb Central Appalachia (CSX) rail coal deal to Platts at $55.50/st for Q3 2019 deliveries for one train/month (33,000 st total).



It was the first trade reported in the OTC market since one CSX train for April delivery sold at $65/st on March 19 and first quarterly CSX trade since November 28, 2018, when a deal for Q1 2019 deliveries sold at $72.85/st for one train/month.



A Central Appalachia producer said the deal was believed to be a trader that had a position and sold it to a utility. He added that “there’s not any market right now for Central Appalachia thermal coal because there isn’t any demand. I think prices at $55 is not making any producer any money. If producers have to sell at that price for an extended period of time, they’re not going to stay in business for long.”



The producer added that the market will see an increase in demand again, when the European thermal coal prices recover in the “next couple of months.”



In the last 12 weeks, 6,000 kcal/kg CIF ARA coal, for 15-60 day delivery, has dropped by 25% from $75.25/mt on March 4 to $56.45/mt on Thursday.



During the same time frame, prompt-quarter 12,500 Btu/lb CSX coal has fallen to a 21-month low $55.50/st on Thursday, down 21.5% from $70.74/st on March 4, including a $6.90 decline in the last two weeks.



Due to the recent downturn in the market, multiple Central Appalachia producers have scaled back production, the producer said..



A broker agreed and said it makes sense to reduce coal production.



“Until the export market comes back, they need to cut back,” he said. “There’s no need to bring on new stuff unless you have contract obligations.”



However, the broker added that problems can sometimes arise when production is scaled back because the “most economical way to run a coal mine is around the clock.”



In Central Appalachia, estimated coal production this year through May 18 was at 35.54 million st, down 3.2% from a year earlier, according to US Energy Information Administration data. However, on an annualized basis, CAPP production would total 94 million st, up 0.6% from a year ago.



CAPP BARGE DEAL DONE AT $54/ST



On the CAPP barge side, a river source reported a deal for 12,000 Btu/lb barge coal for prompt-month loading on the Kanawha River at $54/st.



The source said the deal was for between four and six barges (6,000 st-9,000 st total) and added that the level of the trade was below or close to covering cash costs.



Platts assessed 12,000 Btu/lb CAPP barge coal at $54/st, down $3 from a week earlier, based on the reported trade at $54/st. It was the lowest level for CAPP barge coal since it was also at $54/st on August 11, 2017.



In the last 12 weeks, CAPP barge coal has fallen by $6.40/st, or 10.6%.

News Source: Platts
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