U.S. coal exports last year made up the largest share of production in 60 years, amid diminishing domestic consumption and growing Asian demand, the CEO of Doyle Trading Consultants (DTC) told Montel.
“The percent of U.S. coal going to the export market is essentially at an all-time high – it’s the highest level since the late 1950s, at 15.5%,” Hans Daniels said on the sidelines of the Coaltrans USA conference in Miami, on Friday.
“While producers generally prefer selling to the domestic market, the export market provides a significant and currently lucrative sector for U.S. exporters,” he said, adding some producers therefore planned to increase 2019 production to meet strong export demand.
“You don’t want to put all your eggs in one basket.”
“If the demand is here [in the U.S.] and it’s considered long-term demand, then certainly producers would want to cater to the domestic market first – assuming [domestic and export] prices are equal,” he said.
But an ability to export coal may also prove crucial for the survival of a mine, or mining company.
“Those mines and producers that do not have access to export [infrastructure] are limited to the domestic market, and we see that there is just a declining demand sector.”
DTC figures show domestic utility demand declined by an estimated 4% last year to 637m tons (578m metric tonnes) and may slide further to 614m tons this year and 609m tons in 2020.
“The true opportunities are in the export market, at least right now,” Daniels said.
Indeed, U.S. exports jumped by 18% to an estimated 117m tons in 2018 and would likely remain robust at 114m tons this year and 100m tons in 2020, according to DTC forecasts.
This compares with 99m tons in 2017 and just 60m tons in the previous year.
Exports to Europe
While much of the coal would be shipped to meet an increased Asian appetite for U.S. high-sulphur coal – particularly from India – Europe will remain an important destination, Daniels said.
“Even though European coal demand is declining, European coal production is declining as well,” he said, noting German mine closures would result in a marginal upturn in import requirements.
“That coal’s got to come from somewhere. It’s not a lot, but it’s likely to mean more U.S. coal,” he said, adding the API 2 forward curve indicated U.S. exports – at least from some producing basins – would remain a viable option for the coming few years.
API 2 prices generally needed to be between USD 60-90/t for US coal to be profitable in the European market, he said.
The API 2 Cal 20 was seen last at around USD 83/t and the Cal 21 was at USD 82/t, according to Ice Futures data.
Output from the Central Appalachia generally required an export price at the top end of the range, while some Illinois Basin producers can still export at the lower levels, due to less expensive mining costs, he said.
“I think you’ll see the U.S. continuing to be a dominant player [in supplying Europe],” he said.
One short ton is equivalent to 0.9 metric tonnes.
View article here.
- On February 4, 2019