Some supply overhang still persists in the Utah bituminous coal market, but the basin remains largely in balance compared with Colorado, a Western coal producer said Thursday.
The Utah market is in the process of increased consolidation after several key contracts rolled off at the end of 2016, the source said.
"There is a supply overhang, but it's not nearly as bad as Colorado," he said. "The market will take care of it quickly. You've either got to cut your pricing quickly or go home."
Coal delivered to utilities from Colorado mines dropped to 687,673 st in the first quarter of 2017, down 66% from the same period in 2016, according to US Energy Information Administration data.
By comparison, Utah mines delivered roughly 2.5 million st to utilities in Q1, down 16% from the year-ago quarter.
While the two states' coal production has often been grouped together, they have become ultimately two distinct markets, the source said.
"Coal from Colorado is not able to reach the coast economically and there has been demand destruction back east," a Western producer source said. "That is not happening in Utah."
Utah utilities are expected to put out their final and binding nominations detailing their coal demand in 2018, the source said. The larger utilities are expected to be up 5% from this year, he said, calling it a "modest increase."
The producer said he "was not very excited about 2018" as the "level of activity is not very high" for the industrial business in California and Nevada and the export markets.
Prompt pricing is "right around $41/st" for Utah's 11,700 Btu/lb coal, the source said.
A second producer source said he had heard no requests for proposal in the market, and the last term deal completed was "nowhere near $41/st."
Colorado markets, by comparison, are selling in the $26-$27/st range at the high end for 11,400 Btu/lb coal, he said.
S&P Global Platts assessed Utah's 11,500 Btu/lb coal for Q3 at $38/st Thursday, up 50 cents from the previous assessment, and assessed Colorado's 11,300 Btu/lb coal at $26.50/st, down $2 from the previous assessment.
