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The share of lower heat 8,400 Btu/lb coal produced in the Powder River Basin continues to decline but is unlikely to go away, say market sources. In 2008, production of PRB 8,400 coal came to slightly more than 218 million st, or 45% of the total PRB market. In 2015, however, PRB 8,400 production dropped to 114 million st, or just 29% of the basin’s output. “It all comes down to price at the end of the day, but it will probably go down further then it is now,” said a producer source. The reason is simple enough: lack of demand. But demand is cyclical, and 8,400 coal remains attractive for those utilities that are closest to the basin, given the lower transportation costs. In 2015, the three largest destinations for 8,400 coal were Texas, Nebraska and Kansas. “When you go shorter, [8,400 coal] comes in more competitive because the cost is much better on a [per] MMBtu basis,” said a market participant. For comparison, the three largest destinations for higher heat PRB 8,800 coal in 2015 were Illinois, Missouri and Texas. “If freight is identical, you want to stuff the most BTUs you can in that car,” said a fuel buyer. Interestingly, while prices for 8,400 coal have moved with the market, they have remained relatively flat. In 2008, the spot price for 8,400 coal averaged $9/st. In 2015, the spot price averaged $8.76/st. The spot price hit a daily high of $12.30/st on February 2, 2011 amidst the global rally in commodity prices, and a low of $5.15/st on July 24, 2012, in the aftermath of the so-called year without a winter. On June 24, S&P Global Platts assessed spot PRB 8,400 coal at $7.20/st, slightly off its year-to-date average price of $7.85/st. The current low price reflects low coal demand, as stockpiles continue to remain at elevated levels, particularly for subbituminous coal. The lack of demand is also e...