Illinois Basin markets continue to feel the weight of high stockpiles, cheap natural gas and low electricity prices, but some upcoming requests for proposals should add clarity to the market, sources said Tuesday.
Two RFPs -- from Dayton Power & Light and joint solicitation from Louisville Gas & Electric and Kentucky Utilities -- out in the marketplace in what is traditionally the time of year when buyers start rebuilding inventories after heavy winter usage, a coal producer source said.
"Most people I talk to say, 'our stockpiles are full, electricity prices are lower than expected, we don't need any coal this year,'" the source said. "They say they probably won't need coal next year either."
Inventories totaled 172.6 million st in the latest estimates provided by Coal Trader Analytics, up 15.7% from the same time a year ago. Consumption has dropped 9% across the US this year with the biggest declines in the MISO and PJM regions, down 14% and 10%, respectively.
The Dayton RFP, due Monday, is seeking 250,000 st for Q3, the same amount in Q4, and 1 million st in 2017. It is a standard RFP for this time of year for the Ohio-based utility, the source said.
"In my opinion, this will be some of the lowest pricing they've seen in a while," he said. "Even the low-cost producers are feeling the pinch."
The LG&E KU solicitation, due March 23, is seeking an unspecified amount of high-sulfur thermal coal from the Illinois Basin or Eastern US for 2017, 2018 and 2019. The purchase will likely include a small amount of 9,000 Btu/lb-9,400 Btu/lb, high ash, low sulfur, middling coal, which is used to scrub out boilers, the company has said.
Both companies could end up waiting until fall to make any purchasing decisions for 2017, the source said.
The source reported selling a small industrial-sized allotment of 11,800 Btu/lb, 5 lbs SO2 rail coal into the Upper Midwest at $34.50/st for Q2 and Q3.
Other sources have not seen much if any coal business.
A Kentucky utility said high inventories have clouded purchasing decisions as winter has come and gone.
"We are still in a high inventory situation, and as such, we're not actively participating in any market activity," the source said. "I don't anticipate the market having much activity until some inventory starts to be reduced via coal burn, i.e. summer or thereafter in the fall."
Platts assessed prompt, second-quarter low chlorine Illinois Basin 11,800 Btu/lb barge coal at $35.50/st, and assessed 11,000 Btu/lb barge coal at $31.50/st. Both assessments were unchanged on the week.
