Monday may have marked the official first day of spring in the US, but the Central Appalachian rail and barge coal markets have essentially been in shoulder-season mode since February after a promising cold start to winter evaporated into a warm 2017, thwarting near-term thermal demand.
Utilities have been content with current inventories and contracts, and many do not expect to make CAPP solicitations for months. Fuel buyers said Friday that how hot the early summer becomes will go a long way toward determining coal needs through 2017 and into next year.
"Just like everybody else, it's still wait and see what the weather brings," one utility source said. "A hot start to the summer, obviously, would be best for coal. If we get some good burn early, we'll be in the market."
Very little near-term CAPP interest has been heard, and pricing has declined on diminished demand. The over-the-counter market has accounted for the bulk of spot CAPP activity, with deals for April delivery during the past 10 days falling to $52/st and trades for second-quarter delivery to $53/st.
"The spot market -- it's slow as molasses," one source said.
S&P Global Platts on Friday assessed CSX-quality coal (12,500 Btu/lb, 1.6 lbs SO2/MMBtu) at $53/st FOB rail for Q2 2017 delivery, up 50 cents from last week.
A declining metallurgical export market has also pushed down CAPP thermal prices. Short supply at the end of last year helped to send thermal tonnage into met blends, and producers are now waiting on the new quarterly Asian benchmark announcement in the coming weeks to spark seaborne interest.
One CAPP miner cautioned that a rejuvenated export met market would not lead to the kind of price spikes seen last year, as Australian and US producers are ready and able to ramp production to cash in on new deals.
"The price response will be more muted this time around," the producer said. "People will not be surprised; this is something we are looking forward to."
No new deals have been heard in the CAPP barge market since utility solicitations were awarded weeks ago in the mid-$50s/st for NYMEX-quality (12,000 Btu/lb, 1.67 lbs SO2/MMBtu) coal. A fuel buyer said barge and CSX pricing have remained similar, despite the difference in heat content.
"When it comes to barge prices, producers still in the market aren't interested in losing money," the buyer said. "Now that they aren't competing with brokers and traders who pulled out of there, it's hard to call how those prices will trend."
Platts assessed NYMEX-quality coal at $53.75/st FOB barge for Q2 2017 delivery, unchanged from last week.
