US over-the-counter thermal coal prices changed little Thursday, as competing natural gas futures got a boost from end-of-season gas storage stocks falling to 822 Bcf, a level not seen since 2003.
The increased consumption of gas this winter heating season coincided with electricity-sector coal inventories falling to 132.3 million st this past January, down 26% from a year ago.
Still, equity research firm Wells Fargo Securities said the US thermal coal market remains oversupplied in the near term, amid "chatter" that utilities are likely to switch to coal from gas this summer.
"The US's shale revolution has certainly played a role in suppressing domestic thermal coal demand, as our reduced coal needs have caused exports to nearly double since 2007," Wells Fargo said Thursday in an investor note.
"While the longer trend remains that the generation mix will likely tilt from coal to gas/renewables, near term we continue to hear more and more chatter that generation providers, at least this summer, are switching to coal from natural gas," the note said.
In the US OTC market, Central Appalachian coal prices were little changed from Wednesday.
CAPP rail (CSX) physical May traded at $59.75/st for one train twice. The price was assessed there, up 10 cents.
CSX physical May over June traded at 10 cents/st for one train. June physical was assessed at $59.65/st, down 15 cents.
CSX fin Q3 2014 traded at $60.70/st for 5,000 st/month.
In the West, Powder River Basin 8,800-Btu/lb physical May traded at $12.60/st for two trains and one train. The price was assessed unchanged at $12.60/st.
BHP BILLITON DISCUSSES EUROPEAN THERMAL COAL DEMAND
Dean Dalla Valle, BHP Billiton's president of global coal business, said Wednesday at the Committee for the Economic Development of Australia's Energy and Resources series in Brisbane that shifting European political winds were dampening the growth of thermal coal demand, but supply concerns over gas and nuclear power is prompting a near-term demand recovery.
"In Europe, changes in policy settings in recent years have limited the growth of energy coal demand. But more recently demand has been increasing again on the back of gas supply fears and the planned retirement of some of Europe's nuclear capacity," Dalla Valle said.
"For example, in Germany, electricity generated in 2012 using coal was at its highest level since 1990. The reason for this is Germany's decision to phase out nuclear power, and coal is the next, most economical, solution for the country to meet its baseload energy requirements," Dalla Valle said.
On Thursday, European-delivered CIF ARA physical thermal coal prices fell marginally as the market continues to report lower bids and offers while reassessing market direction looking forward, sources said.
The CIF ARA-FOB CSX, or implied transportation, spread narrowed to $17.78/mt from $18.03/mt Wednesday.
US East Coast thermal coal (6,500 kcal/kg NAR 1% sulfur) was assessed unchanged at $79/mt.
