US coal prices and markets remained idle last week, with the Northern Appalachia region the only mover boosting spot prices 11% on previous weeks, according to leading analysts.
The US government’s Energy Information Administration (EIA) weekly Coal News and Markets analysis said average spot prices for the region were up by US$3, despite the remaining US regions languishing with prices unchanged.
EIA analysts Rich Bonskowski and Bill Watson said the Northern Appalachia rise was likely to have occurred over several weeks, but had been masked by delayed reporting.
The EIA said while four out of five near-month spot coal prices depicted above remain level, reports from the trade press for the fourth quarter and for calendar year 2004 indicate some upward movement of forward spot prices. This coincides with opinions among railroads and some market watchers that electric utilities began to replenish coal inventories during the second quarter of 2003 and in July.
Bonskowski and Watson said reports of increased interest in contract coal were not yet unanimous.
“Offers of longer-term contract coal, if above current spot prices, are often not acted upon. For example, the Tennessee Valley Authority (TVA) issued a solicitation recently for as much as 25 million tons of coal for up to 10 years, depending on contract reopeners,” they said.
“At least one unnamed source, however, felt as of a week or two ago that this was TVA’s way of testing the market and that nowhere near that amount will actually be purchased via this solicitation, even if it was available, which it isn’t (Coal Outlook).”
On NYMEX coal supply transactions had stagnated with virtually no trades settled since June. The fact that trade volumes have been at zero for the weeks ended July 11, 18, and 25 is also true for downstream contract dates and signals a lack of interest at present in hedging against sharp rises in coal prices in the next 12 months or so.
Estimated coal production for the week ending August 2 rose 2.7% on the previous week, but was up 2% on the same week in 2002. Year to date U.S. coal production is behind 2002 rates, however signs are imminent with the pace of production picking up.
According to some reports, recent mining problems at several pits in the PRB Wyoming area resulting from heavy rains have slowed coal shipments, putting them below expectations and prompting increased activity in over-the-counter trades for PRB coal since late June (Coal Daily).
On US import and export news, spot coal traders reported last month that interest was up among U.S. coal buyers for imported coal because of a shortfall currently in CAP coal for short-term deliveries. This along with international supply imbalances had driven up the price for Colombian coal to US$30.10 per metric tonne.
Both coal prices and freight rates have risen sharply because of the extreme heat wave and drought throughout Europe. According to the EIA, as of August 11, Colombian coal was selling for US$31.50 per tonne f.o.b. dockside, and the freight cost was up to US$12.00 per tonne.
“Nevertheless, traditional coal supplies are short, with only small quantities of additional South African coal being offered, even at prices approaching US$43.00 per tonne delivered to Europe,” EIA said.
“Indonesian and Chinese coal have been offered at similar delivered prices, but with the longer shipping times and uncertainties about problems at some Chinese mines, it is not clear whether they will be acted on (Coal Daily).”
Projections on US coal imports by McCloskey Coal’s Colin Gubbins was 50 million tonnes by 2010, originating primarily from mines in Colombia and Venezuela.
McCloskey's prediction is based primarily on factors such as tight natural gas supply with historically high prices in the U.S. market, dwindling of Appalachian mining reserves, and promising development of East Coast port facilities.
The EIA’s 2003 Annual Energy Outlook, released last November, projects U.S. coal imports of 20 million short tons by 2010.
