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Coal Prices Drop Marginally Despite Favorable Indicators

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Powder River Basin coal

PRB (Powder River Basin) spot coal prices averaged $10.35 per ton for the week ended July 31. That’s $0.20 lower than the price for the week ended July 24.

The Powder River Basin is the largest coal-producing region in the United States. It’s located in Wyoming and Montana. PRB produces almost half of the total US coal output. It’s also the lowest-cost thermal coal-producing region in the world.

Peabody Energy (BTU), Arch Coal (ACI), and Cloud Peak Energy (CLD) are major coal producers (KOL) that operate in this region. Despite the increase, PRB coal still remains relatively low. Weak prices for PRB coal don’t bode well for these producers. Alpha Natural Resources, a major PRB coal producer, filed for bankruptcy on August 3, 2015.

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Illinois Basin

The ILB (Illinois Basin) is located in Illinois, Ohio, and Western Kentucky. The basin produces high-sulfur coal. In recent years, ILB coal became competitive with coal from the neighboring Appalachian region, as power plants installed scrubbers to soak up sulfur, which causes acid rain. Peabody Energy, Natural Resource Partners (NRP), and Alliance Resource Partners (ARLP) are major players that operate in the region.

ILB coal prices remained at $34.35 for the third consecutive week, a multi-year low.

Appalachia

The Appalachian region is located in the eastern United States and is the oldest coal-producing region in the country. This region is affected the most by natural gas price movements. However, because Appalachian coal prices are already down to marginal costs, they now show a reduced correlation with natural gas prices.

Central Appalachian and North Appalachian thermal coal prices dropped marginally to $23.88 and $52.25 per ton, respectively.

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