By Jim Levesque and Jason Lindquist

May 17, 2016 - Coal pricing remains depressed and demand absent in the Central Appalachian spot coal market, with hopes of a hot summer hopefully bringing a reprieve, industry participants told S&P Global Platts this week.

Sources said Friday pricing for CSX-quality coal (12,500 Btu/lb, 1.6 lb SO2/MMBtu) remains at a level that's a loss for CAPP producers.

Chatter lingers in the market of potential deals in the mid-$30s/st to low $40s/st range, but no near-term contracts are getting done because of high utility stockpiles and low natural gas prices.

Platts on Friday assessed CSX-quality coal at $36.25/st FOB rail for Q3 delivery and NYMEX-quality coal (12,000 Btu/lb, 1.67 lb SO2/MMBtu) at $44.50/st FOB barge for Q3 delivery.

"That's where pricing is at, but nobody wants to sell at that even if there were buyers," one Virginia-based broker said Friday. "There's just no real demand out there right now."

The few utility requests for proposal for Appalachian coal in the past month -- one by the Tennessee Valley Authority and the other by Southern Company -- have been for shorter terms and for smaller tonnage than the market is accustomed to, sources noted.

"You're going to see that, smaller deals in volumes and terms for a while; maybe that's really what you'll see from now on," one Kentucky-based CAPP producer said. "Stockpiles are just too high. It'll take extended hot weather and some help with higher gas prices to put a dent in them before you'll see any demand. Even then, I'm not sure how much that will help pricing for coal." Multiple sources said this week that weather is going to play a bigger impact than ever on coal pricing. A West Virginia-based broker said that as coal is being relegated to more of a peaking fuel and natural gas used more of a baseload fuel, an increase in power demand will bring more coal burn. That uptick in power demand is needed for an extended time, he said, to have an impact on stockpiles. 

"This winter, we had some snow and cold weather earlier this year, but days later it was again unseasonably warm," the broker said. "That cold weather didn't do anything to stockpiles. This summer, we'll need to see hot weather, and a lot of it, to burn more coal."