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Higher Natural Gas Prices Continued to Support PRB Coal Prices

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PRB spot coal prices

During the week ended December 22, 2016, PRB (Powder River Basin) spot coal prices hit a fresh 52-week high of $12.30 per short ton. The PRB, 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 US coal output. It’s also 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 the PRB region.

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Illinois Basin coal prices

ILB (Illinois Basin) coal prices remained unchanged at $34.17 per short ton on a week-over-week basis. It 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.

Coal prices in the Appalachian region

During the week ended December 22, 2016, Central Appalachian coal prices came in at $56.05 per short ton, which is the same as at the end of the previous week.

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, this region is affected most by natural gas price movements. However, because Appalachian coal prices have already fallen to marginal costs, they show a reduced correlation with natural gas prices.

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