The near-term Northern Appalachia coal market is "extremely tight" because of export demand, a situation that could be further aggravated by a possible ban on the consumption of petroleum coke in India, say market sources.
An export NAPP deal was heard this week priced in the high $70s/mt FOB Baltimore destined for India, according to two market sources.
When asked if NAPP demand from India has increased, one US-based producer said there's "no question about it," and added that interest is also stretching into the Illinois Basin.
"I don't know if we'll have enough coal for the first quarter" because of export demand, said the producer. Cargoes heading to India will add a "fairly significant amount of coal" into the seaborne market, the producer said.
According to estimates from the US Energy Information Administration, fourth-quarter NAPP production through November 18 totaled 13.2 million st, down 27% compared with the year-ago period.
The undersupplied NAPP market, thanks in part to recent production delays at the Bailey, Cumberland and Federal longwall mines, has led to Q4 domestic utility demand but the miner said there's no real tonnage available stateside because of elevated seaborne values.
The producer said prompt pricing for 13,000 Btu/lb, 4.5 lb SO2/MMBtu coal is at $53/st FOB mine in the domestic market but higher at $57/st FOB mine for export.
The demand from India and overseas has led to planned production increases in Q1 2018, the producer said, but how much additional tons is still unknown. The miner said its output could rise as high as 1 million st to 1.5 million st for Q1.
"In the short term, we're looking at expanding going into working Saturdays and Sundays when we were not doing so before and decreasing maintenance shifts and increasing production shifts," the producer said.
EXPORT DEMAND
Through September, year-to-date US thermal coal exports to India total 3.9 million mt, up 155% compared with the year-ago period. Higher seaborne coal prices have largely driven the trade, but the possible petcoke ban -- a final decision is due December 4 -- is likely to stoke demand further.
A US-based market participant said the ban could increase annual Indian coal demand by 10 million mt, with US coal likely to benefit.
The US exported 8.2 million mt of petcoke to India in 2016.
The market participant noted also that quality issues with Indonesian coal are among other reasons that point to increased demand for US coal.
"Right now, I have 10 buyers bidding higher and higher for cargoes, but for December and January, there are no cargoes available," said the US-based market participant. "I have requirements for two shipments in December, but I can't find any coal."
Other market sources are skeptical current Indian demand is sustainable, partly due to domestic US utilities that are unwilling to pay higher prices. "Utilities aren't jumping up to the same equivalent numbers yet," said a US-based broker. "If there is a winter burn and coal gets short, you could see that, but if [producers] bring on more production, export guys don't typically contract unless it's a floating price."
The current export market is "healthy for producers" said the broker, but said prices do seem high.
Dan Klein, a coal analyst with PIRA Energy Group, a unit of S&P Global Platts, said its unlikely India would become a long-term demand source for NAPP producers, noting the government's goal of increasing domestic production and cutting imports entirely.
But for the short term, Klein said its not surprising to see Indian end-users source the best values given the constrained supply of global seaborne coal.
