US coking coal unfazed by Biden presidency
US mining firms expect Joe Biden's presidency to raise some obstacles for the coking coal industry, but there is confidence that infrastructure investment and a different approach to diplomatic relations will foster more favourable market conditions.
Job losses and mine closures in the last year or more, linked to a weak market meant that the Donald Trump administration failed to significantly raise coal employment as the sector had hoped. But support for the outgoing president in the major coal mining states of West Virginia and Alabama remained strong in this last election while Biden secured Pennsylvania by a slim margin of 0.8pc over Trump.
Meanwhile, mining firms appear largely unfazed ahead of Biden's presidency, with most of them focused on taking advantage of the recent surge in Chinese demand for low-volatile and mid-volatile alternatives to Australian coals amid an import curb.
Tighter regulations but limited obstacles
US mining firms expect tighter emissions controls and that permitting processes will be more rigorous, which could delay new projects and raise costs in some cases. "Emissions and stream protection and methane emissions will probably be revisited, but I do not expect a war on coal, and I do not expect financial weapons to be used against coal," one miner said.
In late 2016, Trump started unwinding regulations put in place by former president Barack Obama shortly after taking office. But market forces proved more powerful than Trump's efforts to support the industry thorough deregulation. Competition from lower-priced natural gas and energy plant shutdowns linked to Obama's mercury and air toxics rule kept the coal industry under pressure, and will continue to do so under Biden.
In the past few years, US coal mining firms had already begun a process of shifting towards focusing on the comparatively more lucrative and sustainable coking coal sector, as global steel production and demand continues to increase.
"Coal was already in big financial trouble during Trump's presidency", one mining firm said. Trump's presidency failed to significantly raise employment in the US coal industry, and coal production also fell over the period. The bituminous coal industry employed an average of 51,605 workers in 2019, only slightly up from 50,735 in 2016, while total coal production increased from 725mn st in 2016 to 773mn st in 2017, output only reached 703mn st in 2019, well below the 998mn st recorded in 2014. Total coal output in the US for the first half of 2020 was 260mn st, with second-half figures very unlikely to catch up with last year's amid continued production cuts and mine closures.
Trump's time in office had coincided with higher coal production and prices, bolstered in part by rising domestic demand but largely on the back of increased exports. For example, in March-April 2017, damage caused by Cyclone Debbie on Australia's Queensland Port drove up demand and prices for US coals dramatically. The Argus assessed US high volatile A price peaked at $273/t fob Hampton Roads in the second half of April 2017, compared with $119/t fob Hampton Roads today.
While the US coal sector is historically viewed as a swing producer over the years, unwillingness by financial institutions to associate themselves with fossil fuels, particularly coal, has also meant that access to capital for expanding mine capacity has been difficult for many firms. This slowed US coal output expansion despite the strong pricing environment in 2017-19.
The US exported 55.3mn st of coking coal last year, up by 35pc from 2016. But exports are still below 2011 and 2012 highs of over 63mn t. In the first nine months of this year, US coking coal exports fell to 27.99mn t from 37.06mn t in the same period of 2019, weighed down by widespread demand disruptions linked to Covid-19, particularly in Europe.
As far as US steel demand is concerned, Biden's intention to invest in infrastructure is a positive sign for US mining firms. Market expectations are that Biden will be able to pass some form of infrastructure bill and come to an additional stimulus agreement with Congress to drive recovery from the economic fallout of the Covid-19 pandemic. Either of those could boost steel demand and domestic coking coal demand as a consequence, by encouraging additional spending and steel usage that otherwise may not have occurred.
Improved diplomatic relations will help the industry
US coal exports have not returned to the high of 55.36mn t in 2018 after China introduced tariffs on US coals taking aim at Trump's pledge to put coal miners back to work and revitalise the industry, with every state in the Appalachia region apart from Virginia having voted for Trump in the 2016 presidential election.
Coking coal mining firms are optimistic about international trade relations under a Biden presidency."Biden will be a good diplomat," said one miner, "I believe he will try to work with allies to encourage countries to play by world trade rules, rather than going it alone as Trump has tried to do". "I do not expect strange taxes like there have been in the last few years, and it will be more complicated for countries to wage trade wars," another miner said.
There are also expectations that the Protectionist Section 232 tariffs on imported steel — one of the hallmarks of US trade policy under Trump — appear likely to be adjusted, but not eliminated, under Biden.
If Biden's administration contributes to a more peaceful international trade environment as mining firms expect, this would allow them to depend on continuing trade with traditional customers, while seeking opportunities with non-traditional customers.
It also remains to be seen if Biden will continue to build on the phase-one trade deal negotiated by the Trump administration. The removal of import tariffs have no doubt encouraged the recent spike in US to China coking coal trades.
But China has been slow to react to Biden's victory with a formal acknowledgement only issued today by Chinese foreign ministry spokesperson Wang Wenbin at a briefing in Beijing while President Xi Jinping has yet to offer public congratulations.
While there were earlier market expectations that China's impasse with Australia will not conceivably last beyond the anticipated seasonal peak in demand for the lunar new year holiday period in mid-February, uncertainty over when import curbs will be lifted are now less certain. The Argus assessed Australian premium hard coking coal price fell to a four-year low of $99.40/t fob today.
"We have not received any updates to the current situation. But it is safe to assume that any loosening of restrictions will not be seen until after the lunar new year celebrations in February next year," a north China steel producer told Argus last week. Chinese mills are taking a longer-term approach to re-establishing relationships with US suppliers, with discussions for cargoes heard to be extending well into deliveries for 2021.
| US coal industry | mn t | ||||||
| 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 1H20 | |
| US coal production | 905 | 811 | 658 | 701 | 684 | 638 | 236 |
| US coking coal exports | 54 | 42 | 37 | 48 | 54 | 48 | 28 |
| Average employment (person) | 73,551 | 64,801 | 50,735 | 52,035 | 52,507 | 51,605 | 42,392 |
| — MHSA and GTT | |||||||
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BHP cuts Australian met coal sales guidance again
BHP cuts Australian met coal sales guidance again
Sydney, 18 April (Argus) — Australian mining firm BHP has cut its coking coal guidance for the 2023-24 fiscal year to 30 June to a new decade-low of 43mn-45mn t because of the impact of wet weather and cyclones on its Queensland operations. The BHP Mitsubishi Alliance (BMA), which is 50pc owned by BHP and 50pc by Japanese trading house Mitsubishi, had already cut its guidance by 18pc in January to 46mn-50mn t of metallurgical coal for 2023-24, down from the previous guidance of 56mn-62mn t issued in July. At that time it cited the impact of the sale of the Blackwater and Daunia coking and thermal coal mines in Queensland to Australian independent Whitehaven, which it completed on 2 April, maintenance, a fatality at its 10mn t/yr Saraji mine and increased removal of waste. The latest downgrade was blamed again on the Saraji incident, as well as on wet cyclonic weather in Queensland and an inventory rebuild after the impact of flooding and labour shortages in 2022 and 2023. The inventory rebuild will continue into calendar year 2025, which could further weigh on sales into 2024-25. The further reduction in expected sales volumes led BHP to increase its cost guidance for 2023-24 to $119-125/t from $110-116/t in January and from $95-105/t in June. BHP received an average price of $274.99/t for hard coking coal and $204.55/t for weak coking coal during July-December, up from $242.52/t and $190.74/t for January-June and $270.65/t and $252.12/t in July-December 2022. It defines hard coking coal as those with a coke strength after reaction (CSR) of 35 and above, with weak coking coal being those with a CSR of below 35. Argus last assessed the premium hard low-volatile metallurgical coal price at $249/t fob Australia on 17 March, down from $336.50/t on 17 January. By Jo Clarke BHP metallurgical coal sales (mn t) Jan-Mar '24 Oct-Dec '23 Jan-Mar '23 Jul-Mar '23-24 July-Mar '22-23 Coking coal 5.41 4.76 5.37 14.66 16.86 Weak coking coal 0.93 0.75 0.71 2.21 2.04 Thermal coal 0.02 0.20 0.10 0.52 0.80 Total BMA 6.36 5.71 6.19 17.39 19.70 Total BMA (100%) 12.72 11.41 12.37 34.78 39.39 Source: BHP Australian metallurgical coal prices ($/t) Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Q&A: Ramaco adding production, sees market growth
Q&A: Ramaco adding production, sees market growth
New York, 16 April (Argus) — Randall Atkins is a founder and chief executive of metallurgical coal producer Ramaco Resources. He also has been involved in energy-related investment and financing activity for over 40 years. In this Q&A, edited for length and clarity, he discusses effects from the Francis Scott Key bridge collapse, his outlook for coal and the company's research projects. What effect has the Key bridge collapse and Port of Baltimore closing had on Ramaco and the US coal industry in general? Like most things of that tragic nature, it is going to take longer than everyone expects to actually solve the problem. I think where it is going to impact producers probably more is on the rails. There will be a need for...producers to rearrange stockpiles and to rearrange where they are going to try and ship, even at reduced levels. Particularly, CSX is going to have an immense logistical complexity to deal with over the near-term. We do not ship from Baltimore. We have not seen any problems, knock on wood, with our rail shipments post the incident. What are your long-term projections for metallurgical coal given expectations that low-volatile coal reserves will shrink in coming decades and the steel industry could be in oversupply? Low vol coal has traditionally been the highest priced coal and the dearest, if you will. High vol A coal has over the last few years grown in importance, and to the extent that there is any new increase in production in the US, it's high vol. What we perceive is that there is going to be a crowding in the high vol space. As a result, our increase in production is primarily in low vol. As far as the demand side is concerned, we do not believe that blast furnace steel demand is going to decline anytime soon. There's a lot of noise from the green community that hydrogen is going to replace coal in blast furnaces. We took some advice on that from the IEA…and when that question was posed (to IEA), the answer that was given was it would take about $1.5 trillion to build a pilot plant using hydrogen by 2035 and probably about another equal or greater sum to build a commercial facility by 2040. So, I don't lose a lot of sleep on the demand for coal for blast furnaces. What I do see shifting, however, is the US has held relatively steady at about 20mn short tons (18.1mn metric tonnes) of met coal demand over the last 10 to 15 years. The growth is clearly overseas, and the growth is clearly at the moment in Asia. When we started back in 2017, and 2018 was really our first year of production, we predominantly sold coal domestically; I think 80pc of our coal went to US steel mills. Now that is almost reversed. We're going to sell probably this year, 70pc overseas, and about a third or less domestically. With Europe moving towards electric arc furnace technology and significant new blast furnace capacity coming online in Asia, what kind of role will the US play as a coal supplier over the coming years? It is cheaper to use a blast furnace than electric arc. And the steel that they (Asian companies) mostly require is the heavier steel for cars and buildings and things of that nature. So, they have a bias towards blast furnace capacity. The US and Europe are very developed economies that are trying to go and wean away from coal, (while) the rest of the world is aggressively moving further into coal. People will shake their heads at the cost that European and American consumers will start to have to pay for that privilege. We see market growth is still there, but it's a different kind of growth. It will be more in the Asian markets, predominantly some in Europe, some in South America and Africa. The low vol coal demand in Asia is extremely strong because while they are able to buy high vol product from Australia very inexpensively, they do not have the low vol production. They need that to blend up to get the proper mix in their blast furnaces. There is a very good future for low vol, and that is the direction we are positioning ourselves. How confident is Ramaco about securing its investments in the longer run given the emphasis on ESG? What I see is sort of a dichotomy. In the thermal coal business, there's not a lot of investment in new mining there for the obvious reason that their customer base is declining. On the met side, it is a bit shortsighted from an investment standpoint because of the composition of the ownership of met coal companies. Virtually every major metallurgical coal producer except for us went through bankruptcy and post-bankruptcy proceedings. Their board composition became essentially distressed debt investors...Their interest was not developing a long-term coal company. Strategically their vision was: "How can we most quickly get money back out of that coal company?" We are certainly the only coal company that is doubling in size. We produced a little under 4mn st last year. We will be at about 4.5mn st this year. We can maybe go higher, depending upon the market. The market is not strong right now. The other issue (for coal producers) even when they weren't doing special dividends, is they've now shifted to doing large-scale share buybacks. You are starting to see the cost curve increase for most domestic coal producers. What you haven't seen, but I think you will probably find over the next probably 18 to 24 months, is you will begin to see depletion kick in. The amount of coal that they are able to produce from their existing operation will begin to decline. And that is strictly a result of not investing in new mine production. My approach was to kind of be a little bit of an outlier and then approach coal to products as an alternative use, certainly for thermal coal. And that, of course, brought us to rare earth (mineral extraction). Do you have funding for Ramaco's rare earth materials projects? Let me step back one step. We introduced the idea that we actually had rare earth (deposits) in May 2023….When we sent the samples to be tested, they tested them as if they were hard minerals. In other words, they did not combust off the organic material. What we have done since then, is we went back and we had samples that were probably 200-300 parts per million. From a commercial standpoint, we have kind of crossed the Rubicon that this is indeed sufficiently concentrated that it makes commercial sense. Now what we are doing is we are going through a process of further chemical analysis and testing to determine what is the best extraction and refinement technique. And the last point you raised was financing. We have a very nice growing mining metallurgical business, which can provide the funding to do whatever we want to do on rare earth. I am not too concerned about our financing capability. Any updates on your coal-to-carbon product projects ? We have looked at a number of different things with the national labs. We started looking at carbon fiber, which could be made from coal and we have got some patents around some very interesting processes. The areas that we are now focusing on...are using coal to make synthetic graphite. The other thing we are working on is using coal for direct air capture. We are considering going into a pilot phase sometime starting later this year with Oak Ridge National Laboratory on a synthetic graphite plant. As far as direct air capture, we probably have more work to do. We are also working on that with Oak Ridge. But I would hope that sometime by 2025, certainly 2026, we would perhaps have our first product, quote unquote, to be able to offer into the market. And it would be delightful if it was synthetic graphite. By Elena Vasilyeva Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Poland's JSW declares force majeure on coking coal
Poland's JSW declares force majeure on coking coal
Warsaw, 15 April (Argus) — Polish coking coal and met coke producer Jastrzebska Spolka Weglowa (JSW) declared force majeure on some of its coking coal contracts and cut its output outlook following a fire at its Budryk mine on 5 April. JSW expects production at Budryk mine — which produces premium hard coking coal, semi-soft coking coal, as well as thermal coal grades — to fall by 400,000t than previously planned as a result of the blaze. The fire affected a long wall located at a depth of 1,290m that was planned for closure, but it forced the evacuation of mines from affected areas, the company said. A fire that broke out at the firm's premium hard coking coal-focused Pniowek mine in December last year will also result in greater production loss than previously expected, JSW said. Output at Pniowek will be down by 450,000t from the 350,000t reduction estimated in December. JSW operates four mines in southern Poland. In the first quarter of this year, JSW produced 2.4mn t of coking coal, representing a decline of about 10pc both on the year and on the quarter. JSW's production of coke reached 830,000t in the first quarter of this year, up by 8pc on the year but down by 5pc from the fourth quarter of last year. Metallurgical coke typically accounts for about three-quarters of JSW's total coke output. Its met coke sales significantly exceeded output, reaching 990,000t in the first quarter of this year. JSW last year produced 10.9mn t of coking coal, down by 1pc on the year, and 3.35mn t of coke, up by 4pc on the year. By Tomasz Stepien Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
April-May maintenance to close Australian coal systems
April-May maintenance to close Australian coal systems
Sydney, 10 April (Argus) — Australian rail firm Aurizon will close the 50mn t/yr Blackwater coal system in Queensland over 13-17 April for maintenance, with further closures scheduled for May. The firm, which operates the Central Queensland Coal Network (CQCN), confirmed that it plans to close its 60mn t/yr Goonyella system during 1-3 May, its 15mn t/yr Moura system for 14-16 May and Blackwater again during 27-29 May, as part of an annual planned maintenance programme. The only CQCN system not included in the maintenance programme is the 15mn t/yr Newlands system. Blackwater and Moura deliver coal to the port of Gladstone from the southern end of the Bowen basin. Goonyella delivers to the adjacent ports of Dalrymple Bay Coal Terminal, which is a multi-user facility, and BHP-operated Hay Point from the central Bowen basin. Newlands delivers to Abbot Point from the northern Bowen basin. Aurizon, Pacific National, BHP and some smaller coal haulage operators use the CQCN. Aurizon is targeting a 5pc year-on-year growth in coal haulage by its fleet across the CQCN and New South Wales/southern Queensland in the 2023-24 fiscal year to 30 June. This implies a target of 194mn t for 2023-24. It hauled 94mn t during July-December, leaving it a target of 100mn t for January-June. By Jo Clarke Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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