The Iraqi war and uncertainty about the supply of imported oil are also buoying up future predictions about coal’s place in the energy mix.
Peabody Energy, with 9% of the US market believes coal provides a low-cost, stable form of electricity. The recent jump in natural-gas prices to nearly $10 per million Btu only confirms this.
Already, some producers are reportedly buying back small lots of spot coal, a sign that with stocks tight, mining companies expect prices to continue to firm this summer.
Arch Coal, the second largest coal producer in the US, remains reluctant to sell uncommitted tons into the current spot market, “at prices that fail to provide an adequate return on investment," said Steven F. Leer, Arch Coal's president and CEO.
Leer has predicted that demand could exceed supply in the next 2-3 years and that further industry consolidation is likely.
Recently quoted figures suggest that US electricity demand increased 4% last year, while US coal production fell by around 35 million tons. At the same time power generators continued to pull coal from stockpiles rather than purchase spot volumes. When these buyers re-enter the market they might find the fundamentals governing spot trading are beginning to shift.
