For the week ended November 13, 2015, PRB (Powder River Basin) spot coal prices came in at $9.67 per ton, down from $10.10 per ton at the end of the previous week. PRB coal fell below $10 per ton for the first time in 17 weeks.
The Powder River Basin, located in Wyoming and Montana, is the largest coal-producing region in the United States. It accounts for almost half of the total US coal output. It’s 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. Weak PRB coal prices in the face of the approaching winter don’t bode well for these companies.
The ILB (Illinois Basin) remained at $32.75 per ton during the week ended November 13. The ILB, located in Illinois, Ohio, and Western Kentucky, produces high-sulfur coal. ILB coal became competitive with coal from the neighboring Appalachian region. Power plants installed scrubbers to soak up sulfur, which contributes to acid rain.
Peabody Energy, Natural Resources Partners (NRP), and Alliance Resource Partners (ARLP) are major players that operate in the region. Utilities (XLU) such as Southern Company (SO) and Tennessee Valley Authority use ILB coal.
The Appalachian region
Central Appalachian coal prices dropped marginally to $41.75 per ton, while North Appalachian coal prices remained at $52 during the week ended November 13.
The Appalachian region, located in the Eastern United States, is the oldest coal-producing region in the country. Of all the coal-producing regions, the Appalachian region is affected most by natural gas price movements. However, because Appalachian coal prices are already down to marginal costs, they show a reduced correlation with natural gas prices.