BY CONTINUING TO USE THIS SITE, YOU ARE AGREEING TO OUR USE OF COOKIES. REVIEW OUR
COOKIE NOTICE

Register with us today

and in less than 60 seconds continue your access to:Latest news headlinesAnalytical topics and featuresCommodities videos, podcast & blogsSample market prices & dataSpecial reportsSubscriber notes & daily commodity email alerts

Already have an account?

Log in to register

Forgot Password

Please Note: Platts Market Center subscribers can only reset passwords via the Platts Market Center

Enter your Email ID below and we will send you an email with your password.


  • Email Address* Please enter email address.

If you are a premium subscriber, we are unable to send you your password for security reasons. Please contact the Client Services team.

If you are a Platts Market Center subscriber, to reset your password go to the Platts Market Center to reset your password.

In this list
Coal

Nearly 17% of US coal production uneconomic in today's market: analyst

Metals | Non-Ferrous | Steel

Market Data - Metales

Commodities | Energy | Electric Power | Emissions | Renewables | Natural Gas | Natural Gas (North American)

Northeast Power and Gas Conference

Agriculture | Sugar

El aumento de la molienda de caña de azúcar en el centro-sur de Brasil supera las estimaciones de los analistas

Nearly 17% of US coal production uneconomic in today's market: analyst

Highlights

Daily pricing for tons and allowances for SO2 and NOx emissions

The exclusive Platts OTC Broker Index, a market assessment compiled from three of the largest and most respected coal brokers

What happened in yesterday's OTC markets, and why

An analysis of coal price trends in all major U.S. producing areas

Details of how major coal companies are trading in the financial markets

Coverage of mine openings, closings, production

Reports on who's in the market for coal

Houston — Close to 17% of US coal production forecast for this year, a total of 162 million st, is "unprofitable" in today's market, increasing the risk of more mines being idled or closed, analysts at Wood Mackenzie said Monday.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

Altogether, about 14% of US thermal coal production and 58% of metallurgical coal production is at risk because of pricing in today's market.

The region most at risk, according to Wood Mackenzie's latest coal market outlook, is Central Appalachia, where about 72% of the total coal output is unprofitable. Years of declining productivity, thinning seams, increasing strip ratios, more stringent government regulations and a high-paid workforce have made Central Appalachia the highest-cost region in the US.

Wood Mackenzie said the price to produce CAPP coal is about $65/st, compared with $47.50/st for Northern Appalachia and $34/st for the Illinois Basin.


At today's prices, 13% of NAPP coal is unprofitable, analysts said, compared with 8% for both Western Bituminous and Powder River Basin.

Even though many producers are losing money on the coal they sell, there are many reasons why more US mines are not being idled or shut altogether, Wood Mackenzie said.

One reason producers may keep running a mine losing money is because it could be an asset for sale, said Dale Hazelton, senior research analyst at Wood Mackenzie. An operating mine is more attractive to buyers, he said.

"In general, if you've got the money to buy a coal asset, this is the time to do it," he said. "They're at the bottom of the market. As long as you're doing your due diligence, it could be a good time for the right company to take on assets like mines."

Murray Energy certainly has been in the market to acquire such assets, making the biggest moves recently in the US. Murray announced during the weekend it will spend about $1.4 billion for controlling interest in Foresight Energy, and in 2013 Murray bought five underground thermal coal mines in West Virginia from Consol Energy for $3.25 billion.

Hazelton said another reason mines losing money would still be operating is if a producer is able to beat market prices with a niche-quality coal, or the location of the mine is near an end-user, providing a transportation advantage over competitors.

Long-term contracts are also keeping mines running, Hazelton said. While many producers are losing on every short ton sold for prompt delivery, the amount and size of those deals on the open market is very small compared with coal already sold under long-term contracts at a price above the current market.

Hazelton said it probably is not a coincidence that some long-term contracts with utility companies are coming to an end as federal emissions regulations, particularly the US Environmental Protection Agency's Mercury and Air Toxics rule, are coming into effect. With uncertainty in the market, the prices and lengths of future long-term contracts are up for speculation.

"I don't expect you'll see too many producers who will want to lock in a five-year contract at the current rates," he said. "Now, given the right price, you could see that. But both sides in a deal will have to move the number, but you're not going to see 1 million-ton contracts at these rates."

--Jim Levesque, jim.levesque@platts.com
--Edited by Annie Siebert, ann.siebert@platts.com