US coal producers are transitioning from swing suppliers to permanent fixtures in global markets as interest in higher sulfur coal increases, Alliance Resource Partner’s chief financial officer Brian Cantrell said today at the MLP & Energy Infrastructure Conference in Las Vegas, Nevada.
“A few years ago we viewed the export market as cyclical, with the US playing more of a swing producer roll in those markets,” Cantrell said. “With the ability now of fuel buyers to use a higher sulfur coal and blend it with lower sulfur coal from other parts of the world, we think that dynamic has changed.”
US coal producers could tap into those markets to offset recent drops in domestic demand for coal at power plants. Demand for coal at US power plants is expected to fall by 10pc this year but is growing internationally, Cantrell said.
“A lot of construction is going on (internationally) with another 236 GW of coal-fired power generation currently in the build process, and an additional 339GW of projects announced or in various stages of permitting,” Cantrell said.
Global demand for seaborne coal is expected to climb by 5pc during the next five years, Cantrell said, reaching 1.1bn short tons (997.9mn metric tonnes). By 2023, global demand for high sulfur coal could reach more than 330mn st, he said.
Alliance has grown its export business to capitalize on the trend. In 2016, the company exported less than 2mn st of coal — less than 5pc of its total business. Last year, it exported 11mn st of coal to 31 countries.
But export deals have been harder to strike as international prices have fallen 35pc in the last five months. In December, prompt two-month deliveries of 6,000 kcal/kg coal to Europe was trading above $90/t cif Amsterdam-Rotterdam-Antwerp. The price settled today at $54.43/t cif Amersterdam-Rotterdam-Antwerp.
Cantrell expects the international price will start returning to levels high enough for US exporters to sell into the market in the next 4-6 weeks.
“We do expect that the markets will become attractive to us again, pricing will improve, and we will continue to be able to contract,” Cantrell said. “We expect (exports) to be a significant part of our business into the future.”
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- On May 16, 2019