Coal Prices

Note: This research is in sync with what the utilities and industry representatives were saying at the
Wisconsin Winter Fuels Meeting--that coal prices are up over last year. LB

Energy Insight News for Friday, October 19, 2001

Utilities should prepare for higher coal prices

Coal prices in the United States were in a trough for so long-take your
pick, 10, 15, 20 years, according to some-that big users-read, power
producers-may have been lulled to sleep.

Well, folks, the wakeup call is soon to be sounded, and, for some major
players, it may sound like a bugle blast in the ear.

While spot market prices took off as long ago as July 2000, most major
producers were saved from swallowing the huge run-ups on the spot market
because utilities for the most part use long-term contracts to maintain a
hold on their fuel costs.

However, while the evidence is strictly anecdotal-no buyer wants to tip his
hand to the competition-this much is known: A substantial amount of contract
coal comes off pact in 2002 and 2003.

And suppliers, who have toiled under the mantra that they would make up for
low prices by increasing productivity-for example, cutting labor costs-are
raring to get what they believe they deserve.

One big wild card in the upcoming battle for higher prices is how severe the
country's recession will be. Obviously, a long-term downturn dampens energy
usage so utilities and merchant players don't need to replenish their coal
stocks. Read the entire story at http://www.energyinsight.com.