While coal market fundamentals changed in first-half 2013 compared with the same period of 2012, spot prices remained largely unchanged. Demand for coal was higher and supply was lower in first-half 2013, but because electric companies chose to burn off large inventories instead of buying more coal and because international coal prices were weaker, the spot market remained largely unchanged.
The latest EIA report explained:
The continued rise in natural gas prices drove more use of coal for electricity generation. This, combined with higher electricity demand, resulted in total coal consumption for electricity generation in all sectors of 31 million tons, or 13%, more in the first four months of 2013 than in the same period of 2012. Although data for the second quarter of 2013 are not yet available, the increase in domestic consumption for the first half of 2013 is likely to more than offset the weaker coal exports anticipated in the second quarter of 2013, resulting in higher year-on-year total coal demand.
Importantly, for folks in Southern West Virginia and Eastern Kentucky:
While the supply-demand balance tightened for coal in general, changes in consumption and production of coal from different mining regions varied. The rise of first-half-year average natural gas prices at Henry Hub to $3.76/MMBtu in 2013 is likely to have resulted in overall stronger growth of consumption of the lower-cost PRB and Illinois Basin (ILB) coals. Although Appalachian and PRB coal production all declined in response to lower demand for deliveries, Central Appalachian (CAPP) coal production was cut deeper than all other mining regions—10.3 million tons, or 13%, compared with the first half of 2012. Steadily declining domestic demand for steam coal from CAPP and weaker exports of metallurgical coal compared with the year before forced producers to close higher-cost mines. In contrast, ILB coal production increased year-on-year as the coal expanded its market both domestically and overseas. Higher gas prices and the lower cost of ILB coal relative to Appalachian coals supported more use of ILB coal for power generation in the domestic market. Geographic proximity to coal-exporting infrastructures also enabled the coal to benefit from international demand.