Coal news and updates

US IB term coal prices drop on ample supply, increased competition

US Illinois Basin coal pricing has dropped roughly $2 week on week, on ample supply and increasing competition from Appalachia for a limited set of spring solicitations, sources said .

Requests for proposals that recently were released into the markets should soon provide new pricing levels for IB coal. They include a solicitation from Louisville Gas & Electric and Kentucky Utilities with average specifications of 11,000 Btu/lb and 6 lbs SO2/MMBtu.

No award has been made for the solicitation, which LG&E has said received 24 bid packages.

"I understand they got some pretty low prices," said one broker who bid for the award. "They're out there looking for some coal and there's a lot of coal in the ground."

Other packages that came out for bid included Houston-based Dynegy's request for between 500,000-1.5 million st for both 2017 and 2018 of minimum 11,000 Btu/lb, low chlorine coal, which was due March 29. Birmingham, Alabama-based Southern Company Services also had an RFP for both spot and long-term bituminous coal through 2017.

The same broker also bid on the Dynegy solicitation, but did not expect to get that, either.

"I expect the traditional longwall guys will be in the hunt, depending on how much chlorine these guys can take," he said.

COMPETITION FROM NAPP

With extreme competition for limited contracts, IB producers are also getting displaced by Northern Appalachian coal, a separate broker said.

IB production, which had reached into the Southeastern US when NAPP prices were in the $40s, is now under pressure by NAPP prices that are pushing into the low $30s, the source said.

IB exports out of the US Gulf Coast also are under pressure from NAPP exports off the East Coast into Europe, the source said.

"Some of these areas that the IB penetrates, such as the Southeast and up into Ohio -- NAPP coal is starting to push that away, when you're in the same price range with a whole lot more BTU."

An IB producer who has cut back output by nearly 30% said he was not offering anything below $36/st for Cal 2017, but the second coal broker said deals would only get done at $2 below that level.

"The problem is that a couple of producers have to move coal to reduce their debt," the broker said. "I think that problem is going to exacerbate with more debt coming at them in 2017. You're going to see more coal moving at these lower prices."

Platts assessed IB 11,800 Btu/lb, barge, 5 lb SO2, prompt quarter coal at $33.50/st, and assessed Cal 2017 at $34.40/st. Both assessments were down $2 on the week.

source: http://www.platts.com