June 16, 2019 - The Illinois Basin export market has faced a steep drop in price over the past year driven by low demand, with one source projecting half as many exports in 2019 as compared with 2018.

Exports have felt the biggest impact in 2019 in the basin, an IB seller said, with "a lack of any kind of sales or shipments" into the export market this year.

According to a second market source there is just "no business" in the export market, not for IB or Central Appalachian coal. "It's so out of the money," he said, it barely matters where the price is.

Compared with last year the source expects about 50% less in exports in 2019, he said, adding that "the only thing in the money was stuff booked last year" when API2 was near $100/mt in June.

This June the API2 index is down 50% and exports are going to follow that, he said.

Illinois Basin coal exports on an FOB New Orleans basis, which Platts assessed at $41/mt on Friday, down $4/mt from the previous week. Since early October 2018 FOB New Orleans has fallen steadily from a high of $70.50/mt, following the dropping CIF ARA market.

Another market participant said that he has seen few IB export deals recently despite there being plenty supply available, adding that the market has dropped $5/mt since last Friday and that he expects it to fall further.

Little Demand in the Domestic Market

The seller also noted that the "dead" export market was affecting the domestic market, which has had its own drop since the start of the year.

Platts assessed IB 11,800 Btu/lb rail at $39/st on Friday, down $3/st since February, and IB 11,800 Btu/lb barge at $42/st, down $6/st.

IB 11,500 Btu/lb barge was assessed at $41.50/st, while high chlorine IB 11,500 Btu/lb barge coal was assessed at $40.25/st on Friday, both markets down $5/st in the past four months.

The IB 11,000 Btu/lb barge market was assessed at $38.50/st on Friday, down $4.25/st since February.

While the seller said his sales were locked in for 2019 and that he was "in good shape," he added that this year has definitely seen its fair share of interruptions in production and shipments given "heavy rains."

Since the start of the year the seller said he has lost about 10% of shipments; however "I'm not as impacted as bigger producers," he said.

Heading into summer, "the sad thing is the West Coast is on fire, the Midwest is under water, and in the upper Midwest here we've had 50 degrees at night and highs of 72 during the day and it's halfway through June," the second market source said.

With three "good months of burn" and facing below normal temperatures, "people are very pessimistic," he added.

But the biggest concern, more than weather in the domestic market, is natural gas prices. The NYMEX Henry Hub futures gas price settled at $2.387/MMBtu on Friday, a three-year low for the hub.

"I don't see much demand," the source said. "We've gotten off to a rough start."