The fourth-quarter domestic Central Appalachian thermal market has remained quiet as producers continue to turn their attention to exports and utilities look ahead to 2018.
Tight supply and a robust seaborne market have persisted to lift CAPP prices despite no real prompt demand stateside. Producers on Monday said they are still receiving export inquiries for delivery throughout 2018 and have started to get "strong" interest for 2019.
"The seaborne market is still the story," a miner said. "Certainly, it's been a good story throughout the year for coking coal, but in the latter half of the year, it's been a really good story for CAPP thermal.
"In addition to domestic partners, we see trading companies who do business overseas in the Atlantic that are looking for all 2018 and are starting to look at 2019."
Another producer stressed that export demand has been a much-needed boon to US producers this year.
"The bids you're seeing the market are coming from the export side, they haven't been domestic," the second producer said. "It really has been a savior for the CAPP market in general. If this export market wasn't there, I don't know where all those tons would have gone."
The CIF ARA (6,000 NAR) 15-60 day price grew to $96.30/mt last Tuesday but has started to weaken, falling Monday to $92.90/mt. The miner said it is concerned with the sliding export values but added, "We're still pretty bullish in the seaborne market, and we should be."
Platts on Friday assessed CSX-quality coal (12,500 Btu/lb, 1.6 lbs SO2/MMBtu) at $65.50/st FOB rail for Q1 2018 delivery, up 75 cents from the previous week.
With a tight CAPP supply expected to last into early next year, US producers are weighing whether to concentrate on opportunities overseas or on domestic deals.
"That's the big question: Will these guys play the export market and risk that's going to go away or do you lock up tons here?" one US fuel buyer said.
The producer noted that with US utilities unwilling to lock in longer-term deals, playing the export market has become a lot more similar than ever to domestic contracts.
"It's all short term now," the producer said. "We don't have those 3-year deals with utilities. If a utility wants 6 months and a trader wants 6 months, you at least know the trader is going to take the coal.
"In the past, you'd get the utility business and the drips and drabs would go into export, this year it's been the other way around."
DOMESTIC DOLDRUMS
While export activity has increased in the final quarter of 2017, domestic interest has disappeared. Utility fuel buyers said they are not planning any CAPP buys for this year and are instead looking ahead to contracts for 2018.
One Southeast utility noted it signed Q4 deals months ago as CAPP prices started to rise based on the export market. The utility said it was able to lock in tons at lower prices instead of potentially participating in a more expensive other-the-counter or spot market.
Another fuel buyer said no coal purchases are anticipated for this year but said a solicitation for CAPP barge coal would likely be made after the Thanksgiving holiday.
"Frankly, I don"t think there's going to be a bunch of CAPP coal available for Q1," one producer said. "I think most producers have locked those tons in the export side, and if we do have a strong winter and utilities come into the market, it will be interesting to see where prices go."
