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OTC market: US thermal coal prices firm to softer

During the week ended Aug. 3, U.S. thermal coal markets were firm to softer, with softness in gas prices and early indications that coal burn started the summer below analyst expectations casting a bearish tilt.

The prompt-month NYMEX Big Sandy product was unchanged on the week at $52.00/ton, while the 12,500 Btu/lb, less-than-1% sulfur product was down $1.00, or 1.8%, week over week to $54.75/ton. For delivery next month, the 8,800 Btu/lb Powder River Basin product eased 5 cents, or 0.4%, from the week prior to $11.85/ton.

Prices for product delivered next quarter were flat to slightly weaker as well during the first week of August. For delivery in the third quarter, the eastern rail product was down 25 cents, or 0.4%, to $55.55/ton. Next-quarter delivery of the 8,800 Btu/lb Powder River Basin product was unchanged at $11.75/ton, with the NYMEX-spec product firm at $52.00/ton.

During the week ended Aug. 3, 2018, strip prices were also choppy, with the NYMEX-spec product flat at $52.50/ton; the 12,500 Btu/lb, less than 1% sulfur product easing 2 cents to $56.03/ton; and the 8,800 Btu/lb Powder River Basin product firm at $11.71/ton.

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Natural gas futures remain lackluster and have been offering little in the way of support for coal prices. Through Aug. 3, prompt-month natural gas futures were down 15.8% year-to-date and down 1.2% year over year to $2.80/MMBtu.

Meanwhile, prompt-month API2 swap futures were down 3.2% year-to-date but up 39.8% year over year at $82.90/tonne.

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According to the U.S. Energy Information Administration's latest "Electric Power Monthly" released July 25, U.S. coal stockpiles dropped to 164.9 million tons in May, down 1.3 million tons, or 0.8%, from the previous month.

The agency said that for bituminous units largely located in the East, the average number of days of burn decreased from 84 days in April to 76 days of burn in May. For subbituminous units, which are mostly located out West, the average number of days of burn decreased from 87 days in April to 75 days in May.

Elevated stockpile levels have prevented domestic thermal coal prices from rising and many market sources expect this is trend that will continue into 2018.

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The EIA has said weak global fundamentals and low international coal prices have limited U.S. coal exports, as "lower mining costs, cheaper transportation costs and favorable exchange rates continue to provide an advantage to mines in other major coal-exporting countries."

Longer-term projections for domestic coal consumption and production are bleak. However, thus far, government estimates show coal production has increased year over year, with the EIA estimating coal production at 16.1 million short tons for the week ended July 29. That figure is up 0.6 short tons, or 4.4%, on the week and 13.1% higher than the production estimate during the same week in 2016, bringing year-to-date production 14.9% higher year over year to 449.7 million short tons.

For the 52 weeks that ended July 29, production clocked in at 799.8 million tons, a slight increase of 5% year over year.

SNL Energy is an offering of S&P Global Market Intelligence. Market prices and included industry data are current as of the time of publication and are subject to change. For more detailed market data, including power and natural gas index prices, as well as forwards and futures, visit our Commodities pages.