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US thermal coal export values helped by low supply; hampered by tight capacity, capital

Low supply is helping support US thermal coal export prices, as extra tons remains hard to come by, market sources said Friday.

“I know of only one [Illinois Basin] cargo for sale in Q4, and if you want to buy it, you have to buy some Cal 19 tons, too,” said a US-based source.

US producers remain cautious with production, stuck between fear of a downturn and the more tangible squeeze of a lack of capital. In other words, if producers wanted to bring on additional production to meet demand, few banks would be willing to lend for thermal coal projects.

In addition, transportation delays in terms of rail and terminal capacity that are pushing up demurrage costs, as well as higher rates being charged by rail and barge carriers newly aware of export demand, are putting a lid on more exports.

“The biggest story I’m aware of is the perception on the part of market that the US is going to continue to export ever increasing volumes of thermal coal,” said the US source. “Incremental increases in US exports for the balance of the year are capped.”

“Supply is very tight, which places pressure on FOB pricing,” a European broker said.

The source had been unable to conclude any spot deals over the last week, but placed fair market value at $66.50/mt FOB New Orleans, basis 11,500 btu/lb GAR for September cargoes, and at $83/mt FOB Baltimore, basis 13,000 kcal/kg GAR for August cargoes.

As well as supply tightness, NAPP coal prices were further squeezed by annual maintenance keeping Baltimore Marine Terminal closed between June 30-July 10.

“US tons are very tight at the moment, I’m not sure how much tighter the 11 day shutdown will move prices,” a European trader said.

“July will be very tight, as we only have 20 days to ship all our coal,” a US-based trader said.

The source sold a Capesize cargo of NAPP coal to an Indian buyer on Friday at $84/mt FOB Baltimore, June-loading, adding they would not offer below this level in the near term.
Source: Platts

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