Ramaco issues force majeure on Elk Creek coking coal

US coking coal producer Ramaco Resources yesterday declared force majeure to customers of its Elk Creek project for remaining 2018 contracts, following a storage silo collapse on 5 November.

The company said it does not expect an impact on 2019 sales or that the force majeure will be maintained for next year contracts, but it has suspended shipments from the complex.

The storage silo — one of three feeding the preparation plant at Elk Creek — suffered a partial structural failure, and was idled as a result. Ramaco expects to restart the preparation plant this quarter, or when an alternative conveying system to the plant is constructed.

The Elk Creek mines are continuing production as scheduled, which will build up inventories, Ramaco said. Raw coal storage capacity at Elk Creek is 350,000t.

Ramaco has cut its coking coal production guidance for 2018 to 1.75mn t, from an estimated 1.8mn-2mn t earlier in the year, but said output will depend on its ability to manage stockpiles.

The company's output fell 10pc on the quarter in July-September, to 450,000t, owing to geological issues at Elk Creek, it said today. Sales fell by around 15,000t to 600,000t over the same period.

Ramaco has already committed 1.5mn t of coal to customers for 2019, of which 1.24mn t is for domestic buyers at an average of $113/short ton. US steelmakers came out early in 2018 in the domestic market to secure tonnage for 2019 and are likely to continue doing so in the years to come, executives said during the company's earnings call.

Ramaco has also sold around 250,000t for export at adjusted index prices — higher than previously reported commitments of 200,000t.

The company has around 400,000t left to sell for 2019, including some small amounts of crossover coal, but mostly coking coal, which it plans to export. Total sales are expected to reach 2.1mn t next year, of which 1.9mn t will be produced in 2019 and around 200,000t will be material stockpiled in 2018 and which is expected to be shipped once the force majeure at Elk Creek ends.

Ramaco produces mostly high-volatile coking coal from Elk Creek. Output from the complex is closer to high-volatile type A (HVA) coking coal than type B (HVB), company executives said.

US coking coal supply has tightened significantly this year, amid robust domestic US steel production and strong export demand.

Argus last assessed US HVA at $213.50/t fob Hampton Roads, HVB at $173/t and low-volatile coking coal at $202.50/t on the same basis.