PRB Coal Prices Have Continued to Fall

For the week ending November 4, 2016, PRB (Powder River Basin) spot coal prices fell nearly 0.5% to $ 11.75 per ton, as compared to $11.80 per ton one week previously. The Powder River Basin, which is located in Wyoming and Montana, is the largest coal-producing region in the United States and accounts for almost half of the total coal output in the US. It also represents the lowest cost thermal coal-producing region in the world.

Peabody Energy (BTUUQ), Arch Coal (ARCH), and Cloud Peak Energy (CLD) are major coal producers (KOL) that operate in this region.

ILB (Illinois Basin) coal prices remained unchanged at $33.25 per ton on a week-over-week basis. This represents a multiyear low. The ILB is in Illinois, Ohio, and Western Kentucky and produces high sulfur coal. Notably, ILB coal became competitive with coal from the neighboring Appalachia 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.

During the week ending November 4, 2016, Central Appalachian coal prices came in at $40.00 per ton, which was the same at the end of the previous week. Also, North Appalachian coal prices remained unchanged at $42.25 per ton on a week-over-week basis.

The Appalachia region, which is located in the US East, is the oldest coal-producing region in the country. Of all the coal-producing regions, Appalachia is affected 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.