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Weather more than rail issues likely cause of soft US OTC prices: analyst

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Mild summer weather, not rail problems, is the biggest reason for softness in the US over-the-counter coal market, Ted O'Brien, an analyst with Doyle Trading Consultants said Wednesday.

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The effect is most acute in the Powder River Basin market, but it has also kept Central Appalachia prices soft.

"Lots of people I talk to say you look at the weather in Texas and that dictates the direction of PRB pricing," O'Brien said. "[Pricing] was pretty resilient coming out of the spring, even though we did have rail issues, but I think all the incremental weakness is driven by or attributed to very unfavorable weather."


In the CAPP market, it's the same story, he said. "It's come off, driven almost exclusively by weather," he said. "The [barge market] probably has held up a little better than the rail contract."

In Wednesday's session, the physically-settled CAPP barge contract (12,000 Btu/lb) for September traded at $60/st for five barges/month, at $59.35/st for October for five barges/month and at $59.35/st for December for 20 barges/month.

Two spread trades cleared: Q4 2014 over Q1 2015 at minus 50 cents for 5 barges/month and September over Q4 2014 for 50 cents for 15 barges/month and 5 barges/month. The September leg traded at $59.90/st.

Platts assessed the front-month contract at $59.90/st, down 10 cents. In the CAPP rail (CSX) market, the physical contract (12,500 Btu/lb) for September traded at $56.80/st for one train (11,000 st)/month.

The Q4 financial contract also traded twice on the CME, at $57.10/st for 5,000 st/month then $57.20/st for 5,000 st/month. In addition, the contract traded on the IntercontinentalExchange at $57.10/st for 5,000 st/month. The $57.20/st trade went last.

Platts assessed the front-month (September) CAPP CSX price at $56.80/st, unchanged from Tuesday.

There were no trades cleared or heard Wednesday in the Powder River Basin 8,800 Btu/lb contract. Platts assessed the front-month price as unchanged at $11.45/st.

The European-delivered CIF ARA physical thermal coal spot market fell 60 cents Wednesday on what market participants said was weaker sentiment the EU on Tuesday imposed no sanctions on Russia's coal and gas sectors.

Platts assessed the price of CIF ARA thermal coal (basis 6,000 kcal/kg NAR and for delivery within the next 15-60 days) at $75.95/mt, losing 60 cents from Tuesday.

One northwest European utility trader said that the previous rally had been "a bit overdone" and had been "overdue for a correction down; it's a good a time as any to sell."

"The factor driving the market up was the fear of sanctions and paper was following gas and power higher, while the physical was strongly bid," he said, adding that the rally had gone "a bit too far and driven out the bit of demand that had appeared."

CIF ARA 15-60 day spot prices rose $5.25 from July 1-28, but have lost $1.15 over the last two sessions,according to Platts data.

--Andrew Moore, andrew.moore@platts.com and Jacqueline Holman, jacqueline.holman@platts.com
--Edited by Jeff Barber, jeff.barber@platts.com