Central Appalachian coal producers and brokers continue to try and survive a shrinking and uncertain market, with little to no short-term thermal demand and sustained low prices, market players said this week.
CAPP participants interviewed this week by Platts said spot demand for 12,500 Btu/lb, 1.5 SO2/lb coal is virtually nonexistent. With the price of natural gas staying low and coal stockpiles growing, utilities don't need to make any deals, one Virginia-based broker noted.
"There really is no spot market," the broker said. "Some of the contracts now have quarterly options, but utilities are just taking the minimum delivery. When those roll off, maybe there is some demand. That's the only type of spot market right now."
A producer in West Virginia also said near-term deals are hard to come by because utilities are "not putting spot out there."
But even if there were more opportunities to make spot transactions, what the pricing utilities are looking for is not favorable for almost all CAPP producers, he said.
"Everybody is still wondering how long this type of pricing will continue well below production costs, and nobody sees relief in sight," the producer said. "Until we get pricing to like $65/st to $75/st, you have to weigh how much you're willing to sell at a loss."
The Virginia-based broker said he heard an offer for 12,500 Btu/lb, 1.5 SO2/lb coal for Q1 2016 delivery on the rail near Big Sandy at $42/st. He added that pricing for that coal has remained in the low $40s/st.
An eastern Kentucky producer agreed and said utilities are expecting prompt-quarter deals for CSX coal in the $42/st range.
"Utilities are offering prices on coal $20/st, $30/st and $40/st less than producers can operate for," he said. "If you ship an order at those prices, it's a ridiculous loss. You do it enough, and that catches up with you."
The Kentucky producer added that unless CSX coal prices get into the upper $60s/st to low $70/st, "it's not going to be advantageous" for any CAPP producer.
