Illinois Basin Coal Markets Split as RFP Decisions Near

Illinois Basin markets remain split with some producers selling at lower prices as utilities weigh their needs for 2017 and beyond.

Producers are still waiting on the outcome of several key coal solicitations, including Duke Energy's bid for roughly 1 million st through the end of the year.

Other RFPs, including this week's release from East Kentucky Power Cooperative for upward of 720,000 st of coal over two years starting in 2018, are firming up the market, an ILB producer said.

"You look at the cost curve and forward price curve and see where they dissect and I think there will be demand," the source said. "A lot of these utilities are coming out for 2018 and beyond."

Illinois Basin coal production totaled an estimated 2 million st for the week ended Thursday, down 8% from the prior week, although production is up 17% on a year-to-date basis, Platts Analytics' Bentek Energy said Friday.

More production needs to be taken offline to reach balance, a second producer source said.

"We're seeing some offers that are ridiculously low and more offers grouped in a reasonable fashion," a second producer source said.

Several RFPs remain outstanding in the market, including Duke's bid for roughly 1 million st that will feed plants in Indiana, Florida, the Carolinas and Kentucky over the remainder of the year.

Duke was heard to be waiting for updated burn projections for second-half 2017 before proceeding, a third producer source said.

"I still think they will buy some, but maybe a bit less than originally planned," he said.

The utility is expected to pay roughly $36/st for 11,800 Btu/lb coal, the second producer source said, who noted prices for 11,800 Btu/lb high chlorine barge coal were being heard at $36/st, and prices for 11,500 Btu/lb high chlorine barge coal were heard at $35/st.

A deal was heard in the low $30s/st for 11,800 Btu/lb high chlorine barge coal. A second deal was heard at $37-$38/st for 11,800 Btu/lb, high chlorine rail coal.

Platts assessed IB 11,500 Btu/lb, 5 lb SO2/MMBtu coal at $36/st, down $1.50 from the previous assessment, based on a survey of market sources.