Low prices and weak export markets continue to make Colorado coal a tough road for producers, while Utah markets remain tight, an industry source said this week.

Colorado remains oversupplied as domestic utility customers have cheaper options through natural gas or renewables. Still, some producers are moving supply east as weak netbacks are preferable to the export markets, the source said.

"They are either shoving it east or through the Gulf, which has a terrible netback, below cash cost probably," the source said.

Expensive rail rates are the biggest obstacle, the source said. He noted that some customers are still looking at coal for a reliable and consistent fuel source, but are not willing to pay for it.

Most contracts are being done on an annual rather than a quarterly basis as consumers want a reliable and consistent fuel source, he said.

The source reported a deal for 100,000 st of Colorado coal in the "low $30s," but said the deal was an outlier, and a couple of bucks above the market. Most of the volumes sold in Q3 of this year, he said.

Cal 2016 contract prices for Colorado's 11,300 Btu/lb thermal coal range between $28.25/st and $28.75/st, he said. Each 100 Btu/lb carries roughly a 25-cent premium, the source said.

Platts assessed Colorado's 11,000 Btu/lb coal for Cal 2016 at $27.75/st on Thursday, down 35 cents from last week's assessment, and assessed the 11,700 Btu/lb coal at $29.50/st, down $1.50.

In Utah, producers are finding more success selling into the industrial markets, which are actually forecasting increasing coal use next year, the source said.

"Our big, committed customers are taking everything we're making," he said. "It's an encouraging number."

Utilities are still paying less due to low gas prices, he said.

Cal 2016 prices for Utah's 11,500 Btu/lb thermal coal are ranging from $39.50-$40.50/st, with utilities on the low end and industrial customers paying on the high end, he said.

Platts assessed Cal 2016 contract coal at $40/st on Thursday, up $1 from last week's assessment.

--Jeffrey McDonald, jeffrey.mcdonald@platts.com
--Edited by Annie Siebert, ann.siebert@platts.com

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