The small volumes of Central Appalachian coal seen moving the last few weeks in spot deals have come at the lowest prices of the year, sources said Friday.
A Kentucky-based producer said he's seen a handful of trains shipping CSX-quality coal (12,500 Btu/lb, 1.6 lbs SO2/MMBtu) at prices in the $30s/st to low $30s/st range.
The producer said with natural gas prices falling even lower and coal stockpiles remaining high, utilities really have no need for more CAPP coal. The few spot deals getting done are happening because buyers are getting very cheap prices, he explained.
"Right now, if you're moving spot coal, those are the prices. That's the type of market we"re in," the source said. "Producers and traders are losing money on that, for sure, but they have to move coal. If you"re doing it, you"re doing it to get cash flow."
Other CAPP sources have echoed the same sentiment, saying no sellers are making money in any prompt spot deals.
Spot deals done in the $30s/st are being made to bring cash into the company to pay off debt and fill coffers for payroll, another CAPP producer said.
QUALITY ISSUES REMAIN WITH CAPP BARGE COAL
The market for NYMEX (12,000 Btu/lb, 1.67 lbs SO2/MMBtu) barge coal is even quieter, sources said. Industry players confirmed there still are quality issues with coal stored for extended periods of time at the Big Sandy River, which has required more blending.
"It's not a good situation with the coal along the river, and with production down, it's not going to get any better," a source said.
A RFP issued by the Tennessee Valley Authority on Wednesday for NYMEX-quality coal echoed industry concerns on CAPP barge coal quality. The utility requested bids for six barges (9,000 st) of NYMEX coal for delivery between February 22 and March 14. The RFP says TVA will only accept mine-specific coal offers, and all offers should state the specific mine, coal seam and blends from each seam.
"For a smaller RFP, it's unusual to have mine-specific specs," a CAPP producer said. "They're doing this to stop blending. Normally you won"t see an RFP with conditions like this."
The same source said he expects producers and some traders will get "aggressive" with their pricing on the RFP, with bids possibly around $43.25/st submitted before the February 17 deadline.
