News

Speculation over a fourth-quarter benchmark settlement near $200/mt in the Asian seaborne coking coal market has Central Appalachian sources talking of strengthening Central Appalachian thermal prices through the winter, with pricing potentially approaching $70/st.

News on Oct. 10 of a Q4 mid-vol deal at $200/mt between Peabody Energy of Australia and Nippon Steel of Japan raised eyebrows. Sides in Asia are still negotiating a Q4 price, and the Peabody-Nippon deal could point to a settlement at $200/mt, or at least much closer to that figure than many have estimated.

One West Virginia CAPP producer heavy into the international markets said a month ago Asian buyers were looking for a Q4 settlement at $155/mt but had recently increased the offer to $180/mt.

The producer said a price of $200/mt would be “incredibly higher” than anticipated.

“No doubt the market is trending up, but a number like that, if we see a settlement at about $200/mt, it means you really have to think that you’ll see higher prices than expected through 2017,” the producer said.

Closer connection

While Asian coking prices usually have little effect on CAPP thermal figures, this year there is a much greater connection between the markets. Historically, high prices in Asia increase prices for US met exports to Europe, which holds true today. But what has changed in 2016 is coal supply.

Extreme production cuts in the eastern US this year have limited available thermal and met tonnage. A rise in export met pricing months ago came at a greater pace and ahead of a rise in thermal pricing as summer began. Producers took advantage of the met increase and sold thermal tons that could be blended into the met market.

Those thermal tons are not coming back, producers continue to say, as coal companies churn out tonnage under contract with no desire to increase production. US Energy Information Administration data shows CAPP production is down almost 30% year to date, a drop of about 25 million st.

“Unless you have a committed long-term deal at a good price, you’re not looking to mine extra tons,” one Virginia-based CAPP producer said. “Even for a good quarterly deal, it’s going to cost you to open back up mines and get ...