US net coal importer in March, utility stockpiles tight: Merrill

US net coal importer in March, utility stockpiles tight: Merrill

Washington (Platts)--20May2005


The US became a net importer of coal in March for the first time since
December 2003, with imports from Colombia jumping nearly 100% to 2.4-mil
metric tons, up from 1.2-mil metric tons in March 2004, according to analysts
at Merrill Lynch. Analysts Daniel Roling and David Lipschitz said Powder River
Basin coal was trading at $8.05/ton on the spot market last week, up 32% from
last year. "Test burns in the East as well as continued rail improvement out
of that region have increased demand for PRB coal," they said. "Meanwhile
prices in the East slumped...as imports, predominately from Colombia, were
substituted on the eastern seaboard for some Central Appalachian production."

Central App coal traded at $57.50/ton this week, up 10.6% from last year, but
down from the recent high of $60/ton the week of April 22. Northern
Appalachian prices traded flat, as spot market prices hit $35, representing a
34.6% increase over last year, and up from the recent low of $33.50/ton.

Roling and Lipschitz added that stockpiles are at very low levels for some
power plants, and a hot summer could make matters much worse. "Most coal is
consumed in power generation, and power demand has grown in 48 of the last 50
years," Morgan Stanley analyst Wayne Atwell said this week. "Furthermore, for
the first time in 20 years, we have seen a supply response from coal producers
and supply/demand is tight." The Merrill analysts agreed, adding that utility
coal inventory remains tight. 

Based on their model, the pair said April's days of supply are slightly above
the new industry "norm" of 40. "However our estimate for April is the lowest
inventory level we have seen during the last 10 years. We estimate utility
inventories at the end of April were at 44 days of supply or 113.9-mil tons,
12.0% and 6.3% lower than April 2004. "There are unconfirmed reports that
several utilities in the East might be in dire need of coal, but some buyers
might be prolonging purchases a little longer in the hope that some price
relief is forthcoming," Roling and Lipschitz said.

This story was originally published in Platts Electricity Alert
http://www.electricityalert.platts.com

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