US Central Appalachian coal producers and brokers are still hoping some kind of thermal spot market will develop with winter approaching, but many in the industry said this week they aren't holding out much hope.
Market players continued to say in interviews that utilities were not looking to make any deals for prompt delivery.
"There just is no spot market for CAPP coal," one West Virginia producer said.
A Virginia-based broker echoed the same sentiment. "There's nothing going on; absolutely nothing."
Pricing for 12,500 Btu/lb, 1.5 SO2/lb coal remains depressed, with a consensus in the market that Q1 2016 contract pricing is asked in the $42/st range. That price is a "loser" for all CAPP miners, the producer said, noting prices would need to be in the $60s/st or $70s/st for producers to break even.
"With prices in the mid-40s nobody can stay in business," the broker said.
A cold winter would help utility coal demand in the short-term, the producer said, and give CAPP coal a "shot in the arm" at the end of a tough year.
"It would be a Band-Aid where we need a tourniquet," he said. "It would be a temporary help, but a help." He warned that spot deals would still see low pricing.
Utility gas burn is up and coal stockpiles are higher in the region and nationwide. Platts Analytics data shows coal consumption by US power plants is down 9%, or 46.7 million st, this year with the steepest declines coming within those independent system operator regions that burn the most CAPP coal.
MISO coal consumption has decreased 13%, or 27.8 million, while PJM coal consumption has decreased 12%, or 16.7 million st.
Combined, those reductions have equaled a 44.5 million st drop in coal consumption compared to last year.
The producer said CAPP miners are doing their best to cut costs and adjust production to the switch in fossil fuel generation, but a change to more baseload generation from natural gas has taken its toll.
"You can't run coal mines on a spot market," he said, adding CAPP production still needed to decline to help pricing in the long term.
Platts Analytics data shows CAPP production is down 20%, or 25.1 million st, year to date. If current production cuts continue, CAPP production will fall behind Northern Appalachia production in 2015. Last year, CAPP production totaled about 133.6 million st, compared to 133 million st in NAPP production.
