Coal prices jump 17.5% this month

By Tom Stundza -- Purchasing, 6/27/2007 7:58:00 AM

With electrical generation expanding in early summer, Central Appalachian coal prices have increased by $7/ton in the past month to $47. Also, high-sulfur Northern Appalachian prices are currently $38/ton, up 22.6% from last year. Imports are high, already averaging $67/ton.

Year-to-date through June 16, electricity generation was 1,803,747 gigawatt hours, up 3.3% versus the same period in 2006, as power generation coal burn was up from 73.42 million tons last year to 76.097 million tons in April (latest available data). Yet, new-coal supply is down this year, as Energy Information Administration data shows overall production through May down 2.2% compared to the first five months of 2006. Year-to-date production in Pennsylvania was down 11.7%, Kentucky was down 7.8%, and West Virginia was down 6.4%.

So, the coal-price increase might have been higher, suggests Merrill Lynch analyst David A. Lipschitz, except that coal inventories held by U.S. power generators are at their highest level since June 2002. Still, further inflation is possible, he says, noting that “the continued prospect of environmentalist litigation, including mountaintop removal mining challenges and associated reclamation work, serves as a reminder of the significant risk associated with (suppliers) operating in the Central Appalachian region.”