PRB spot coal prices
For the week ended January 1, 2016, PRB (Powder River Basin) spot coal prices came in at $10.40 per ton. This compares to $10.25 per ton at the end of the previous week. The Powder River Basin, which is located in Wyoming and Montana, is the largest coal-producing region in the United States. It accounts for almost half of the total coal output in the United States. It represents 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.
Illinois Basin coal prices
ILB (Illinois Basin) coal prices came in at $32.60 per ton during the week ended January 1, 2016, which was a multiyear low. The ILB, located in Illinois, Ohio, and Western Kentucky, produces high sulfur coal. Notably, 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
During the week ended January 1, 2016, Central Appalachian coal prices came in at $43.33 per ton. North Appalachian coal prices remained at $48.95 per ton.
The Appalachian region, which is 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.