Coal prices in the Illinois basin followed international markets higher as sellers preferred to export coal than to take lower prices in domestic sales.

Prompt quarter 11,500 Btu/lb 5lb SO²/mmBtu coal climbed by 25¢/short ton to $39.35/st fob barge. Prices for third quarter deliveries of 11,800 Btu/lb 4.5lb SO2/mmBtu and 11,000 Btu/lb 6lb SO2/mmBtu coals also climbed by 25¢ apiece, to $40.35/st and $35.60/st, respectively.

The 11,000 Btu/lb market was heard to be between $35/st and $36/st, maintaining a $3.50-$4/st spread with the more common 11,500 Btu/lb Illinois basin specification.

Sellers anticipated strong exports into 2020, which pushed those prices in the Illinois basin higher. Calendar year 2019 11,500 Btu/lb coal rose by 40¢/st to $38.30/st. Calendar year 2020 also was up 40¢/st to $38.80/st.

Those followed the direction of API 2 coal swaps for low-sulfur 6,000 kcal/kg coal delivered to Europe, $87.99/metric tonne for calendar 2019 this week, up from $87.18/t last week. European markets also remained in backwardation, with the prompt quarter averaging $94.63/t and the fourth quarter at $93.28/t.

That could help offset domestic demand constraints. Some domestic buyers said that while Illinois basin prices alone are attractive, logistical costs make the spot market unattractive. Barge freight rates have risen with the increase in export demand, and recent rises in diesel prices can make rail, truck and barge transportation more expensive as well.

Generators with inventory were instead choosing to burn that on-site coal.

Natural gas prices climbed at the end of this week, which could improve the economics of burning Illinois basin coal. Day-ahead prices at the Chicago Citigates hub reached $2.728/mmBtu on 7 June, up 3.8¢/mmBtu from the end of last week. In that region, $2.75/mmBtu is considered a price that would motivate feedstock switching.

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