Interest for US export coal remains strong in US Gulf, Baltimore: sources

Houston (Platts)--6 Apr 2018 239 pm EDT/1839 GMT

The US export market has lightened in the last few weeks with a decline in European pricing, but high sulfur coal continues to solicit interest from emerging markets such as India and the Mideast, market sources said.

"I think a lot of tons were put to bed when the [CIF ARA] was higher," said one US broker, noting that deals may have lessened but tons continue to move under agreements sealed last year.

The Platts CIF ARA marker, for delivered 6,000 kcal/kg NAR coal into Northern Europe, peaked at $98/mt on January 2 of this year, the culmination of an eight-month rally that saw the price increase nearly 45% from a low in 2017 of $67.75/mt.

The price declined 21.7% in the ensuing weeks, bottoming at $76.70/mt on March 28. The price was assessed Friday at $81.10/mt, up $1.50 from Thursday.

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"Most of what we sell, we pretty much [sold] that earlier this year," said a second US broker, noting that FOB prices for Central Appalachia coal are well below netback prices.

S&P Global Platts on Friday assessed 12,500 Btu/lb, 1% sulfur, thermal coal FOB Hampton Roads at $88/mt, reflecting a net forward price based on front-month CAPP rail (CSX) pricing. There were no bids, offers or trades heard.

"When the [CIF ARA] was close to a $100/mt, a handful of traders jumped in and grabbed a whole bunch of paper and physical business," said an Eastern coal producer. "But the arb window now is closed."

Bituminous coal exports out of the Norfolk census district totaled 780,000 mt through the first two months of 2018, up 12% from the same period last year.

From Baltimore, which is the closest port for Northern Appalachia coal, a deal was heard earlier this week for 120,000 mt for 6,900 kcal/kg NAR coal for April-May loading at $81/mt, while another deal for a similar cargo was heard at $83/mt.

A bid for 6,900 kcal/kg NAR coal for delivery to India was also heard at $101/mt, with an offer at $103.50/mt.

India has come into the US market for thermal coal much stronger than in years past, as uncertainty regarding a possible ban on the consumption of petcoke has left Indian users seeking alternative solid fuels.

"India is a spot market in general," said the first US broker. "I don't think you would see them do term deals at a fixed price. They don't like to pay above market, they will pay what the market is."

Platts assessed 13,000 Btu/lb, 2.6% sulfur thermal coal, FOB Baltimore (roughly 6,900 kcal/kg NAR) at $83/mt, based on the reported deal.

In the Gulf, continued interest for US coal has been heard, with offers for 6,100 kcal/kg NAR coal heard at $58/mt and $61/mt for May cargoes.

Thermal coal available for export in New Orleans is typically sourced from the high sulfur Illinois Basin, and buyers often demand a discount, though the so-called sulfur discount can fluctuate based on delivered pricing rather than a hard value for sulfur, say sources.

A more pressing issue for Gulf exports is the continued overcapacity in the IB market, said the first US broker. He added that a relaxed sulfur cap in Turkey could provide some relief.

"That could make all this high sulfur coal track a lot closer to [CIF ARA], which might make the sulfur discount a more meaningful number," said the first US broker.

"That overcapacity keeps the IB FOB price suppressed and limits how much IB can go into the market, so that's why I think if Turkey [relaxes its sulfur cap], it could make this [market] a lot more robust," the broker said.

Platts assessed 11,500 Btu/lb coal, 2.9% sulfur, FOB New Orleans (roughly 6,100 kcal/kg NAR) at $60/mt, based on the reported offers.

--Andrew Moore,

--Edited by Derek Sands,

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