Houston — As coal supply tightened in 2018, due to a boom in the export market, market participants expected supplies to replenish in early 2019, but so far, sources said people are still getting caught up from last year.
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One producer said the wet weather in the fourth quarter, which slowed production, exasperated the situation.
"The weather during Q4 has been affecting everyone's production," he said. "A lot of people needed coal late in 2018 and in December, and that's kept it tight into January because that coal got shifted into December."
The source said he heard that a utility paid in the low $80s/st for 12,500 Btu/lb Central Appalachia rail (CSX) coal.
"I still have people calling me asking if I've got any available trains," the producer said. "I wish I had some extra [coal] lying around. People are still getting caught up. I thought [the tightness] would only be during Q4, but it's been pushed into Q1 now."
Despite estimated US coal production in 2018 falling 3% year on year to 751.03 million st, production in Central Appalachia is estimated at 95.47 million st, which would be up 4.2% from 2017 levels, according to data from the US Energy Information Administration.
The estimated 2018 CAPP production would be the highest since 103.54 million st was produced in 2015, according to the EIA.
RECORD RAINFALL IN KENTUCKY
Another CAPP producer source also mentioned the utility paying in the low $80s/st for CSX coal, due to the extreme tightness.
"Even though the weather has been relatively mild the last four-five weeks, coal is still very tight out there," he said.
A lot of the coal market, particularly surface mining, in the near term will be weather driven, the second producer said.
"We're behind on our shipments because of the wet weather," he said. "We had a record amount of rainfall in 2018 in Kentucky, West Virginia and Virginia."
According to the WKYT news station, Lexington, Kentucky, received over 70 inches of rain in 2018, eclipsing the previous record of 66 inches set in 2011.
"The utilities have gotten a little bit of a break, but I could see prices starting to soften in mid-to-late March, if the weather remains mild, when the shoulder season typically starts," the second producer said. "However, if it gets cold, I'll be wrong and the prices will continue to remain strong."
In the US over-the-counter thermal coal market, offers were heard for CSX 12,500 Btu/lb coal for Q2 deliveries at $75.50/st on Tuesday and Wednesday, but dropped to $75.25/st on Friday.
S&P Global Platts assessed Q2-delivered CSX coal at $74/st, up 50 cents from last week.
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