Central Appalachian coal industry players are heading into 2017 with a completely different attitude than a year ago.
Sources told S&P Global Platts this week there's an overall air of positivity and expectations of a soon-to-be active spot market that includes strong pricing.
"What a difference a year can make," one CAPP producer said. "Last December was a real struggle that set up a bad start to 2016 that took a long time to recover from. This year, it's totally changed. We are in a much better situation, and there's optimism we'll see a good start to the year with some added spot demand."
The CAPP market was blown away by the headwinds of a perfect storm in December 2015 as low natural gas prices and warm weather combined to swell utility stockpiles, wipe out coal demand and decimate pricing. A year later, however, gas prices are up near 2016 highs, more cold weather is creeping in and coal prices remain strong.
"2017 has the potential for a year of healing," the producer added. "2016 will probably go down in recent history as the worst year we've had."
The CAPP spot market has remained thin in December, sources said, with a few trains this month moving at prices in the high $50s/st to low $60s/st for prompt delivery, but volumes could increase soon.
One fuel buyer said Friday that a colder fourth quarter of 2016 coupled with higher gas prices has encouraged coal burn in the East "with coal plants for the for time this year being dispatched ahead of gas plants -- and reduced coal stockpiles to a little more than a week above preferred levels."
Platts Analytics data show PJM Interconnection coal burn has hovered around or above 3 million st in each of the past three weeks.\
If anticipated cold weather in January arrives, eastern coal plants will "run pretty good," especially given gas prices approaching $4/MMBtu, the fuel buyer said. That added burn will likely lead to a spot market for late first quarter and second quarter 2017 delivery of CAPP coal, the buyer added.
"We're actually looking forward to Q1 this year," the buyer said.
CSX SUPPLY REMAINS LOW
There's still little CSX-quality coal (12,500 Btu/lb, 1.6 lbs SO2/MMBtu) availability in the near-term as producers continue to shift thermal tons into metallurgical blends, sources said. A lack of supply has kept pricing high despite unsteady prompt demand.
S&P Global Platts on Friday assessed CSX-quality coal at $61/st FOB rail for Q1 2017 delivery, unchanged from last week.
A West Virginia producer called the volume of thermal coal heading into the met coal market "remarkable," and said such crossovers will continue even with some decline in met coal prices because the margins between the markets will likely stay wide for some time.
The resurgent met coal market this year has ultimately put a higher floor in place for 2017 CAPP thermal coal pricing, the first producer said, adding that the year ahead could be a time where "a lot of producers can dig themselves out of a big hole."
