Alliance Resource Partners (ARLP) reduced its guidance on 2019 thermal coal exports as lower international coal prices made booking sales more challenging.
The US coal producer expects to export approximately 11mn short tons (10mn metric tonnes) of thermal coal this year, down by about 1mn st from expectations set in January.
Alliance said it will delay a planned production increase in the Illinois basin in response to the lower expected export volumes in 2019.
“While we expect opportunities for coal exports to develop later this year as markets improve, it is difficult to predict the timing of when conditions will become favorable,” chief executive Joseph Craft said today.
Most of Alliance’s exports go to Europe, where prompt two-month deliveries of 6,000 kcal/kg coal averaged $74.50/t cif Amsterdam-Rotterdam-Antwerp during the first quarter, down from $91.88/t in the fourth quarter of 2018. According to Argus assessment, prices are averaging even less now — $58.22/t from 1-26 April. But API 2 coal swaps for deliveries later this year and in 2020 are higher, indicating export support will improve, company executives said.
In addition, lower customer inventories in the eastern US should lead to domestic utility purchases later this year, Craft said.
The company booked an additional 600,000st of coal into the export market during the first quarter, bringing its total export commitment for 2019 to 8.6mn st. Domestic commitments for 2019 climbed to 30.3mn st from 28.8mn st in January.
Alliance also has 21.6mn st of coal under contract to ship to the domestic market in 2020, up from 18mn st in January. The company has no export volumes booked for 2020.
The company left its Illinois basin production guidance for 2019 unchanged at 32.8mn-33.8mn st, but said output would likely be on the low end of the range. Expected production from Appalachian mines remained at 10.7mn-11.2mn st.
The company also left total sales guidance for 2019 unchanged at 43.5mn-45mn st, including Illinois basin sales of 32.9mn-33.9mn st and Appalachian sales of 10.6mn-11.1mn st.
The company expects 2020 volumes to be comparable to 2019 guidance.
“As we look to 2020 we believe the (export) market will start improving,” Craft said. “We continue to believe the demand is there.”
Alliance’s early expectations for 2020 export volumes are around 11mn st. If it is much lower than that, the company may increase the volumes it sells to domestic customers, Craft said.
“On the domestic side, we are seeing opportunity continue to grow in that area where we believe we can pick up some market share,” he said.
Alliance shipped 10.3mn st of coal last quarter at an average $46.12/st, up from 9.4mn st and $45.07/st a year earlier.
Flooding and high water levels along the inland waterways delayed about 750,000st of coal shipments during the quarter. Despite that, Illinois basin shipments grew by 9.5pc to 7.7mn st last quarter and Appalachian volumes increased by 10.8pc to 2.6mn st.
Alliance expects to make up the missed shipments over the coming months.
The company’s average revenue in the Illinois basin rose to $41.35/st last quarter, up by 5pc from last year. That offset a 2.2pc decrease in Appalachian coal prices to $59.46/st.
Expenses per ton fell by 1.9pc to $29.17/st primarily because of increased volumes from lower-cost mines.
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- On April 29, 2019