Powder River Basin (PRB) coal prices could rise further in 2026 as producers face constraints on boosting output and demand holds steady.
The year is starting with some US coal-fired units running longer than anticipated — some by utility choice, others under Department of Energy (DOE) emergency orders aimed at preserving grid reliability. A number of these plants consume PRB coal. TransAlta's Centralia plant in Washington consumed 1.83mn short tons (st) (1.66mn metric tonnes) of PRB coal in January-October 2025, US Energy Information Administration (EIA) data show. Consumers Energy's JH Campbell plant in Michigan used 3.7mn st over the same period, while Xcel Energy's Comanche unit 2 consumed 877,391st. All three facilities were scheduled to be retired in 2025, but will remain in operation through at least early 2026.
However, the response from coal producers to any improvement in demand could be uneven, which could in turn constrict competition and boost prices. The EIA projected in December that western US coal production would decrease to 274mn st in 2026 from an estimated 284mn st in 2025. More than 80pc of western US coal output comes from the PRB.
PRB coal production rose in most of 2025 after two years of declines, but annual output may still have been below 2023 levels. EIA estimated mines in Montana and Wyoming, which primarily yield PRB coal, produced 228.2mn st from 1 January through 27 December 2025, up by 5.9pc from the same period in 2024. In comparison, mines in those states produced 266.3mn st in all of 2023.
While larger producers in the basin appear optimistic about market conditions for this year, the two biggest PRB producers — Peabody Energy and Core Natural Resources — said in October they had nearly all of their expected 2026 production already under contract to sell.
"Are we confident about running at max capacity for the next couple of years?" asked Malcolm Roberts, Peabody's chief commercial officer, on 30 October. "The answer is definitely yes in the PRB."
However, "adding on capacity is not something you do for one year; it is going to need customer commitments, and then we'll be looking for the price signals," Peabody chief executive officer Jim Grech said. "We'll see what the market does in terms of price signals to bring those additional tons on. I think that's the best way to look at it."
Producers are uncertain that 2025's uptick in coal-fired generation and coal demand as well as delays in power plant retirements will continue beyond the next few years. Some market participants expect smaller producers with higher-cost operations to eventually be forced out of business as major banks continue to pull back on lending to coal mining companies.
In the near term, PRB coal producers are diversifying their client portfolios, which may leave some larger utilities unable to secure all the coal they have requested.
This supply tightness has already lifted prices for additional tons sought for prompt quarter deliveries. PRB 8,800 Btu/lb coal prompt quarter shipments were assessed at $14.95/st in the week ended 2 January, well above the $13.10/st and $13.95/st in the same weeks of 2025 and 2024, respectively. Additionally, some sellers are adding extra charges — or ‘adders' — to contracts for coal shipments that might be postponed from 2026 to 2027.
PRB mine employment and operating hours continued on a downward trend for most of 2025. The basin's mines employed an average 4,226 people in the first nine months of the year, according to the US Mine Safety and Health Administration (MSHA), the fewest employees since January-September 2004. The number of hours each miner worked in January-September 2025 was the lowest since the first nine months of 2005.
Average employment at PRB mines in January-September decreased by 6.9pc from the same nine months of 2024, with miners' hours down by 3.7pc in the same period, MSHA data show.
The declines in employment and hours worked took place even as coal-fired generation in PRB-consuming regions of the US such as the Midcontinent Independent System Operator (MISO) and Electric Reliability Council of Texas (ERCOT) topped year-earlier levels.
EIA projected in December that coal power in MISO, ERCOT and the Southwest Power Pool would slip in 2026. Some of its forecast likely was based on power plant retirements, including the closures of some facilities that have since been postponed or are likely to be postponed. For example, the agency's generator inventory data for November had unit 2 of Xcel Energy's Comanche coal plant in Colorado retiring by the end of 2025, but Colorado regulators in December approved a plan to keep the Comanche unit 2 open for another year.
Most US generators that have spoken with Argus anticipate coal burn in 2026 will remain largely in line with 2025 levels, while some project a slight uptick. Even utilities considering coal unit retirements are negotiating additional tons, asking PRB producers to accommodate incremental needs if their units are required to run longer.
Rising demand pushed PRB mine productivity for January-September 2025 to a three-year high of 25.9 st/hour, Argus calculations of MSHA data show. More recent information from the US Labor Department and EIA suggest employment and production may have lagged behind year-earlier levels in the final months of 2025. That further sets the PRB up for tight supply in 2026.
