The winter storm moving across the US Midwest into the Northeast will help to boost coal burn across the region in the short term, but won't lead to new spot deals, utility fuel buyers told said Monday.
Warm temperatures, reduced power demand and low natural gas prices have mostly erased the near-term market this year, sources said, and the late cold employ outages at coal units as the spring shoulder season begins. More coal plants offline now means gas will make up more of the increase in power demand.
"We'll certainly be running a harder than we thought for the next few weeks, and that'll keep the coal moving, but it won't lead to any new purchases," one Illinois Basin and Northern Appalachian utility fuel buyer said. "This is the coal we thought we'd be burning in February that we're now burning in March."
The National Weather Service on Monday issued winter weather advisories from eastern Iowa through western Pennsylvania and a winter storm warning from northern Virginia northeast through Maine. Blizzard conditions are expected throughout the Northeast starting Tuesday, with more than a foot of snowfall likely from eastern Pennsylvania to southern New England.
"We'll burn more coal for a week or two than we planned, but the effects will overall be pretty minimal," a Powder River Basin and Central Appalachian utility coal buyer said. "The biggest effect will be the weather driving up the price of natural gas. That helps, though it's not looking like a good year for coal burn. Our opinion hasn't changed there."
The Henry Hub natural gas front-month futures contract neared $3.40/MMBtu in January then fell to as low as $2.564/MMBtu on February 21. Pricing, though, has shown more rapid strengthening in the last week and the contract gained 3.5 cents Monday to settle at $3.043/MMBtu.
"Our plan is to see where gas prices fill out after this winter before thinking about coal purchases," the IB/NAPP buyer said. "When you run your burn model at $3.40 gas and $2.60 gas, you see a vast difference in what your coal needs will be."
