[janus]

Barged CAPP coal contracts sell off for third straight session


Washington (Platts)--2Feb2012/548 am EST/1048 GMT




Barge-delivered Central Appalachian thermal coal prices fell for the third consecutive session Wednesday, as the NYMEX March natural gas futures contract lost 12.1 cents to $2.382/MMBtu.

Over the past three sessions, the CAPP barge prompt quarter contract fell 6.3% to $59.50/st, while the March natural gas futures contract fell 13.6% over the same period.

Gas and coal prices have become increasingly correlated of late as low gas prices have led to the displacement of coal-fired power generation. With gas prices trading near a 10-year low, power plants are favoring natural gas over Central Appalachian coal.

The CAPP rail (CSX) prompt quarter contract fell 3.9% in the same interval, settling at $58.80/st. Barge contracts accounted for nearly all of the day's trading volume in the CAPP market, including term trades as far out as Q2 2013. Prices settled below their intraday highs, as natural gas prices fell further into negative territory in the afternoon session.


In CAPP barge, Q2 2012 traded at $59.50/st for five barges and at $59.75/st for five barges three times. Platts assessed the term at $59.50/st, down 75 cents/st.

Q2 2012 over Q1 2013 traded at a discount of $6.50/st for five barges.

Q4 2012 traded at $63.75/st for five barges. The Q4 2012 strip traded in better volume on Tuesday, transacting in a range of $64.50-$65.50/st, totaling 30 barges.

Q4 2012 over Q1 2013 traded at minus $2.20/st for five barges.

Q1 2013 traded at $66/st for five barges three times, at $66.25/st for five barges and at $65.75/st for five barges.

The infrequently traded Q2 2013 contract traded at $67.50/st for five barges and at $68/st for five barges twice. The only other time this contract was seen trading was January 20, at $65.50/st for five barges. At that time, the Cal 2013 contract was trading at a near-term low of $66.75/st.

Cal 2013 traded at $69/st for five barges three times. Platts assessed the package at $69/st, down $1.25/st.

Separately, CSX physical March 2012 was heard to have traded at $59.25/st for one train. The contract was later offered at $59.50/st, according to a market source. Platts assessed the contract at $59.25/st, unchanged.

CSX physical over financial Q2 2012 traded at 25 cents/st for one train over 11,000 st. The Q2 2012 physical contract was assessed at $58.80/st, down 45 cents/st.

CSX financial Q4 2012 traded at $62.50/st for 5,000 st. The Q4 2012 physical price was assessed at $62.90/st, down 65 cents/st.

The Cal 2013 package was assessed at $69.10/st, down 90 cents/st.

In the Powder River Basin, 8,800-Btu/lb prices fell, with the biggest losses at the front of the curve. The front month contract was seen trading for a third consecutive day. The session also saw a couple of off-spec spread trades involving lower-sulfur PRB coals.

PRB 8,800 physical March 2012 traded at $9.90/st for one train. The contract was seen trading at $10.50/st and $10.25/st on Tuesday. Platts assessed the contract at $9.65/st, down 60 cents/st. The front month contract is at its lowest level in at least the past nine months.

PRB 8,800 physical Cal 2013 traded at $13.05/st for one train. The swap was heard to have traded at $12.60/st for 10,000 st and at $12.75/st for 5,000 st. Platts assessed the physical contract at $12.70/st, down 5 cents/st.

PRB 8,800 financial back-half 2012 over Cal 2031 traded at minus $2.35/st for 40,000 st over 20,000 st.

PRB 8,800 ex-Black Thunder March-June over PRB 8,800 financial Q4 2012 traded at a discount of 55 cents/st for one train over 20,000 st.

PRB 8,800 ex-Black Thunder Q2 2012 over PRB 8,800 financial Q4 2012 traded at a discount of 50 cents/st for one train over 15,000 st.

On the IntercontinentalExchange, the CAPP barge Q2 2013 futures contract was seen with a bid-ask of $66.50-$70/st, each for five barges. The offer was later lowered to $68.75/st for five barges.

The contract was framed at $68.50-$70.25/st, each for five barges in the prior session.

PRB 8,800 March 2012 was seen with a bid-ask of $9.85-$10.50/st, each for 10,000 st. The bid was subsequently lowered to $9.75/st, for 15,000 st.

PRB 8,800 Q2 2012 was seen with a bid-ask of $9-$10/st, each for 10,000 st.

PRB 8,800 Q4 2012 was framed at $10-$11.50/st, each for 10,000 st. PRB 8,800 Cal 2014 was seen with a bid-ask $13-$15/st, each for 5,000 st.

PRB 8,800 Cal 2013 over Cal 2014 was seen offered at minus $2.10/st for 5,000 st. The spread was offered at minus $1.50/st for 5,000 st.

--Charlie Noh, chang_noh@platts.com

[prebuffo]

Is anyone have some data of the correleation between degree days and gas consuption (or weekly gas withdrawal) this winter and 2009, 2010, 2011 winters?

[ben2008]

Prebuffo - here is HDD vs Power Demand.


* generation figures are bcf/week
** HDD are weekly totals

[prebuffo]

Originally Posted by ben2008 Prebuffo - here is HDD vs Power Demand. * generation figures are bcf/week ** HDD are weekly totals

many many many thanks!

[vferg]

Salem power plant could be converted to natural gas generation: http://www.pennenergy.com/index/powe...to_retire.html

FirstEnergy to retire three more coal-fired power plants within its fleet: http://www.pennenergy.com/index/powe...to_retire.html

[tom22]

Deutsche Bank - Coal To Gas Switching = 5.6 bcfd

COALFACE CRACKS UNDER PRESSURE FROM CHEAP GAS
By Liam Denning
WSJ

Cheap natural gas creates winners and losers. Coal miners fall into the latter camp, Liam Denning reports on Markets Hub. (
Cheap natural gas creates winners and losers. Coal miners fall into the latter camp.

Low-price gas encourages electricity generators to use gas-fired plants more and their coal-fired plants less. In the 12 months through November, 24.4% of U.S. electricity came from gas, against 42.8% from coal. In 2008, the figures were 21.4% and 48.2%. A decade ago, they were 17.9% and 49.8%.
This coal-to-gas switching is one of the few things supporting gas prices. Deutsche Bank estimates it is boosting U.S. gas demand by up to 5.6 billion cubic feet a day, equivalent to about 8% of demand. But that eats into coal demand. Friday, Alpha Natural Resources became the latest coal miner to announce cutbacks to cope.

Unfortunately for miners, there is ample scope for gas-fired plants to work harder. The legacy of the late 1990s' "dash for gas" remains. Nationwide, 39% of generating capacity is gas-fired, versus 31% for coal, says Morgan Stanley, yet gas-fired stations are used far less than ones burning coal.
Coal miners have had a few breaks go their way. The delay to implementation of new pollution rules—which would force some coal-fired plants to shut altogether—provides some breathing room.

But just as gas inventories have ballooned, taking prices down, so coal stockpiles are starting to rise. Current inventories equate to about 65 days of demand, 4% above the five-year average, according to UBS. Exports help mitigate that, in an echo of what is happening in the oil market amid weak domestic demand. But about half of U.S. coal exports go to Europe, where demand isn't exactly booming.

Consequently, Central Appalachian coal prices have fallen 15.4% so far this year, almost exactly in line with gas's decline. That looks like a race to the bottom to preserve market share. Miners must hope gas producers finally blink and scale back their output.

[vferg]

2012 new power capacity in the U.S

New coal gen: 4,467MW
Retiring Coal gen: 1,863MW
Total increase in coal capacity this year: 2,604MW

New nat gas gen: 4,960MW
Retiring nat gas gen: 667MW
Total increase in gas capacity this year: 4,293MW

[Gary]

Barclays Capital analysts:
Coal to gas switching is limited by a variety of factors (including the number of power plants that can burn gas): thus we believe annual average coal displacement in the eastern power markets will be capped at about 5 Bcf/d on an annual average basis in 2012. The Mid-Atlantic and Midwest regions have the largest installed base of coal-fired units, but idling coal is limited by spare gas-fired capacity. The Midwest and Gulf states could contribute another 3 Bcf/d, followed by the West at 2 Bcf/d.
However, the full 10 Bcf/d of coal displacement will not be needed to balance the gas market. Relative to 2008, we estimate coal displacement in 2012 to average 5.9 Bcf/d.

[Gary]

Genscape: U.S. coal consumption fell 6 pct last week from the previous week and was down 13 pct from the same week a year ago.

[a]

IT'S DARK DAYS FOR COAL AND POWER SECTORS (Another 14% of coal-fired capacity might be switched off)

IT'S DARK DAYS FOR COAL AND POWER SECTORS
By SPENCER JAKAB
Dow Jones

To the uninitiated, "dark spreads" sound unpleasant—like ugly splotches found on mens' shirts on a muggy day. And right now, they aren't even fun for executives in the coal and power industries, especially as unseasonal warmth makes them sweat.

In those industries, the bigger the dark spread, the better since these are a measure of the wholesale margin power plants earn by burning coal. These spreads have shrunk or turned negative amid a glut of natural gas and waning electricity demand.

Thursday's weekly reports on power generation and rail transport from the Edison Electric Institute and American Association of Railroads, respectively, will likely add to the gloom. Year-to-date, U.S. electricity generation and the volume of coal transported by rail were off by 5.4% and 7%, respectively, compared with a year ago.

After a brief golden period, coal-fired power has faced a perfect storm since 2008. Looming environmental rules, sharply lower gas prices and a collapse in electricity prices have made dozens of mostly older coal plants uneconomical or not worth upgrading. Coal's share of power generation is at its lowest since 1979. Another 14% of coal-fired capacity might be switched off in favor of natural-gas turbines this year, according to Barclays Capital. These woes are specific to the U.S. In the next five years, Peabody Energy expects global coal demand to grow by more than a billion tons, mostly from China and India. That is more than the U.S., the largest holder of reserves, produces in total.

But U.S. coal producers can't easily tap into that vein. Most extra demand will be satisfied by shipments from places like Australia and Indonesia, even if some excess U.S. thermal coal supply is now entering the global market. New export facilities on the Gulf and West Coasts may help but won't fully replace lost domestic demand.

Reflecting this, big U.S. coal producers Peabody and Arch Coal have bought assets abroad or diversified into different varieties of coal, such as that used in steelmaking. Still, if natural-gas prices remain anywhere near current decade lows, it will be hard for domestic mines to recover.

With most of America's coal far from the coasts and far more costly to transport than extract, the outlook is growing darker.
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