Coal prices fall as PRB rail repairs progress; stockpiles low

Washington (Platts)--26Sep2005

Coal prices fell last week as BNSF Railway and Union Pacific made progress on
repairs to their joint line in the Powder River Basin.

"Powder River Basin coal was trading on the spot market at $10.10/ton, up
68.3% from last year, but down 10cts/ton from last week's $10.20/ton,"
analysts Daniel Roling and David Lipschitz of Merrill Lynch said late
Thursday. "Meanwhile, prices in the East also slid as the rail problems in the
PRB had driven eastern prices higher. Central Appalachia coal was trading at
$57/ton [last] week, down 9.2% from last year and $1/ton from last week.
Northern Appalachian prices have decreased to $36/ton, down 21.7% from last
year, but increased 25cts/ton from last week."

As the US heads into the shoulder months, the Energy Information
Administration said cooling degree-days through Sep 17 were 15% above normal
and 14% above 2004. Higher cooling degree-days means temperatures were warmer
than normal. As a result, electricity generation was 3.2% higher this year
through Sep 13 than in the same period of 2004, EIA said. 

In August, coal production declined in the East, but increased in the West,
the Dept. of Energy said. Overall coal production for 2005 was up 0.7%
compared with 2004, DOE said.

Merrill Lynch said inventories at utilities are still tight, as this summer's
hot weather and rail disruptions kept inventories at record low levels. "The
latest numbers from the [Dept. of Energy] are for July at 106 million tons, or
34 days of supply. This is 5.2% lower than last year and the lowest July level
in our database."

Based on their model, the analysts said August's stockpiles are "well below"
the industry "norm" of 40 days.

"Our estimate for August is for the lowest inventory level we have seen during
the last 10 years for August," Roling and Lipschitz said. "We estimate utility
levels at the end of August were only 31 days of supply, or 98 million tons,
9.6% and 14.5%, respectively lower than August 2004 levels."

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