Trade Resources Industry Views Platts Assessed Wednesday The API2 Q1 2014 Contract at $83.40/Mt

Platts Assessed Wednesday The API2 Q1 2014 Contract at $83.40/Mt

A spike in the front-quarter CIF ARA c had eastern US coal export executives guessing Wednesday how much the out-of-the-money range for Central Appalachian thermal coal prices had narrowed.

Platts assessed Wednesday the API2 Q1 2014 contract at $83.40/mt, jumping $2.10 on the day to an over three-week high and the largest on-day climb since October 16.

The concern from traders in the European thermal coal market is that Colombia will not grant an extension to companies that fail to comply with a January 1 deadline to install direct-loading ports.

Especially hit would be major Colombian thermal coal exporter Drummond, with a US coal export executive estimating that, if the company was blocked from exporting its Colombian coal until it completed the required port project, about 5% of its Colombian exports could be affected in the early part of next year.

The Colombia talk "is just about Drummond," he said, remarking about information he had heard from a colleague at a European conference.

Drummond competitor Glencore's 2-mile levee to the Colombian harbor is complete, the export executive said. Drummond is about three months behind on its project and could lose about 5% of its yearly production in blocked shipments, he estimated.

But the exporter also noted a two-month strike against Drummond in the spring didn't greatly move export markets, and neither did Australian flooding early in 2013 that blocked coal exports from that country.

"Nothing happened," the exporter said. "We'll see ... I'd like to ship some coal."

While a US-based coal trader guessed that eastern US coal specced at 11,300-Btu/lb, 1% sulfur and 15% maximum ash was as little as $2.50/st out of the money with the current CIF ARA price, the export executive said the spread remains much wider.

The trader said, "API 2 [CIF ARA] is up [about $1.35/mt] in Q1 on the front end. ... If you've got a really attractive freight rate and throughput rate and capacity, the market's opening for Q1. ... It's getting closer ... physical probably has a $2 premium" to CIF ARA.

"I would think Alpha [Natural Resources] would probably be the biggest benefactor [and] Peabody Coaltrade ... I'm just guessing," he said.

But the exporter said, "I don't think any deals are getting done ... they're waiting for the numbers to go a little higher. ... Even though they've still improved, they're still a little light."

He estimated that the 11,500-Btu, CSX-delivered spec is still out of the money by about $2.50/st netting back to the mine.

The exporter figured that, backing off Platts latest dry bulk Panamax freight assessment of $14.80/mt from the US East Coast to Rotterdam from the $83.40/mt Q1 2014 contract price assessment leaves $68.60/mt, or about $62.24/st, and from that an estimated $20/st for rail and throughput should be subtracted, resulting in about $42.24/st FOB railcar.

"That's still a pretty good-sized gap," the exporter said, unless "somebody dumps a cargo for some cash flow ... you can't keep a mine open with that."

Appalachian coalfield sources and coal miners have long said production costs remain in the low $60s/st, and current export numbers just won't work for the profit margin.

Platts assessed US East Coast thermal coal (6,500 kcal/kg NAR 1% sulfur) up 25 cents on Tuesday to $80.25/mt.

Source: http://news.chemnet.com/Chemical-News/detail-2195051.html
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US East Coast Coal Exports Still out of Money Despite CIF ARA Jump
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