Coal Prices Soar as Inventory Falls

Power Companies Are Running Out of Coal

Peabody Energy (BTU), CONSOL Energy (CEIX), and other coal-mining companies’ business is booming as demand for coal outstrips supply. Power plants’ supplies of coal are at lows not seen since the 1970s. The push to build up supply ahead of the winter has sent prices of domestic thermal soaring to 10-year highs.

The price of a short ton of Central Appalachian coal reached $100 this fall—double the price a year earlier. Meanwhile, Powder River Basin Coal, which is mined in Wyoming and Montana, hit an all-time high of $35 per short ton earlier in November.

Demand Stays Strong Despite High Prices

There is still a shortage of coal on the spot market, which is creating difficulties for power companies. Miners have been selling their coal output in advance as natural gas, solar, and wind farms gain popularity. With higher-than-expected demand, it is now difficult for miners to ramp up production.

Even if the miners were able to increase output, ports and railways are already clogged with backed up shipments, which would also make it difficult to deliver coal. As it stands, coal inventory at US power companies is about two-thirds of what the five-year average is at this point in the year.

Power Plants Take Steps to Prepare

The low coal supply has prompted power company PJM Interconnection to take steps to preserve coal for the coldest days this winter. It will shut steam plants down if the coal supply falls below what would be needed for 10 days in order to conserve its reserves. Those shutdowns typically occur when supply is 32 hours from running out. For context, PJM provides electricity to one-fifth of US households.

Coal has received a bad reputation as the world transitions to greener alternatives, but it is also in demand when green energy isn’t available or natural gas prices are too high. That has been the case this year.

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ABOUT Meg Richardson Meg Richardson is a writer specializing in markets, technology, and personal finance. She loves breaking down seemingly complex ideas and making them readable and interesting for everyone. She holds an MFA in writing from Columbia University. When she is not writing about finance, she enjoys running in Central Park and drawing cartoons.

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