Coal Supply at Some Utilities ‘Less Than 20 Days,’ Alpha Says

Jun 18, 2014 9:51 pm ET

June 18 (Bloomberg) -- Coal inventories at some utilities can cover less than 20 days of demand, said Bill Davison, vice president of thermal sales at Alpha Natural Resources Inc.

In December, power plant stockpiles of the fuel fell below 60 days for the first time since the summer of 2011, according to the U.S. Energy Information Administration. A harsh winter helped to increase coal consumption and snarl railroad deliveries, forcing utilities to eat through stockpiles.

“That’s the kind of message that’s out in the marketplace,” said Davison in a presentation at Doyle Trading Consultants Coal Q&A Luncheon in New York. “There are some entities with less than 20 days of coal on the ground. Some with 10 to 15 days.”

By some measurements, the winter of 2013-2014 was the coldest in more than 30 years in the contiguous U.S. Temperatures across the contiguous U.S. were below average from December to February, according to the National Climatic Data Center in Asheville, North Carolina.

Rail companies have struggled to work through a backlog in order to help replenish the inventories. Two-thirds of all the coal shipped in the U.S. last year was transported by rail, the EIA, the Energy Department’s statistical arm, said in a June 11 report.

Warren Buffett’s BNSF Railway has said that it plans to spend $5 billion to help upgrade service.

New York Mercantile Exchange coal futures fell 17 cents, or 0.3 percent, to $59.53 a ton yesterday. Prices have gained 6.3 percent this year.

Coal from the Powder River Basin, which holds the nation’s cheapest and largest reserves of the power-plant fuel, has surged 20 percent to $13 a ton, data compiled by Bloomberg show.

Power-sector coal inventories fell by 30 million tons between the end of December and the end of March and supply is projected to fall in August to the lowest level since February 2006, according to the EIA.