Tightness limits North American met coal exports

  • : Coking coal
  • 22/01/14

Supply setbacks weighed on US and Canadian coking coal exports in November, while historically high prices throughout October and early November gave mining firms an incentive to ship cargoes where possible.

November coking coal exports from the US fell by 6.62pc from a year earlier to 3.24mn t, most likely as a result of the large volumes loaded in October. US exports rose by almost 1mn t or 31.9pc from a year earlier in October to 3.97mn t, up by 17pc on the month. Exports in the second half of the year have tended to be higher than the first half as mining firms have raised output where possible in response to strong demand from Chinese buyers. Still, output growth has been constrained by the ongoing strike at Warrior Met Coal, as well as a general labour shortage and poor rail performance.

November shipments from the US to China more than trebled from a year earlier to 1.12mn t, a monthly increase of 8.59pc. But December and January shipments can be expected to plummet, as Chinese port authorities started to clear pre-ban Australian coal cargoes on 28 October. Argus' daily fob Hampton Roads assessment averaged a record high of $495.06/t in October, compared with $112.75/t a year earlier.

Total US exports for January-November rose by 9.2pc to 37.54mn t, while shipments to China within the same period rose more than tenfold to 10.04mn t. Shipments to major Asian importers outside China fell significantly, as did shipments to major Atlantic destinations outside Europe. Shipments to India fell by 23.7pc to 2.78mn t, while shipments to Japan fell by 4.3pc to 2.78mn t and shipments to South Korea fell by 60.5pc to 825,088t, as buyers in these countries turned to Australian material that could not be sold in China.

The same factors affected US exports to Brazil, where exports fell by 21pc to 4.54mn t, and Turkey, with shipments falling by 70.2pc to 666,430t.

But shipments to the EU inched up by 1.54pc to 9.53mn t over the same period, while US exports to Canada rose by 4.06pc to 2.89mn t.

Canada's January-November exports inched up by 1.37pc to 24.79mn t, while exports to China almost doubled to 8.56mn t. November shipments from Canada fell by 16.2pc on an annual basis and 30.1pc on a monthly basis to 1.9mn t, as flooding and mudslides affected major producer Teck's shipments from the middle of the month onwards. Canada's November shipments were heavily focused on Asia, particularly China, with shipments rising by 156pc from a year earlier to 710,230t. Exports to Japan rose by 43.7pc to 476,776t. Canada shipped no coking coal to Europe or South America in November.

US coking coal exports'000t
DestinationJan-Nov 2021±% y-o-yNov-21±% y-o-y±% m-o-m
South Korea825.1-60.5110.8-49.2n/a
Canada coking coal exports'000t
DestinationJan-Nov 2021±% y-o-yNov-21±% y-o-y±% m-o-m
China 8560.990.1710.2156.3-34.1
South Korea4450.7-15.2379.3-2.8-3.1

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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. 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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. 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