February 4, 2019 - U.S. met coal supplies have tightened in high-vol A and high-vol B grades as production dropped off in the fourth quarter, limiting spot opportunities currently, according to suppliers and traders who met in Miami last week.
U.S. met coal export prices relative to the TSI Premium HCC benchmark for Australian FOB exports have risen in January, with the S&P Global Platts high-vol A assessment at around parity with TSI PHCC on average last month, up from just below 95% of TSI in December. High-vol B rose to 83% to the TSI PHCC benchmark in January, from 76% in December.
U.S. East Coast low-vol may be better balanced on strong regional demand and as the Pinnacle mine closure helped offset a reduction in demand from China due to tariffs on U.S. coals.
Fewer U.S. blends were being sold into tariff-hit Turkey since the second half of 2018, sources said, which led to more blend material, especially in Central and Northern Appalachia, seeking other markets.
Some of the high-vol output declines were expected to be short term but the overall market has been left tighter as Ramaco has recovered this quarter from a silo outage, which hit processed coal volumes since November.
Ramaco was expected to be running processing of raw coal at 80% at Elk Creek since it installed a temporary system in January, under previously released company plans.
Other miners including Blackhawk Mining and Arch Coal reporting falling output at related mines to MSHA were still facing challenges.
The coal industry remains working to minimize headwinds, including equipment availability and technical challenges worsened by declining investment in coal services, and adapting to any sudden changes in geology at remaining reserves.
Since bankruptcies hit the U.S. sector, met coal mining output recovered slowly from 2015, with upside limited by structural barriers such as availability and maintenance rates on equipment, and hiring qualified personnel.
Blackhawk's Panther mining complex was planned to recover in volumes this quarter from a sharp drop in output during the fourth quarter at the American Eagle mine, according to sources close to the matter, citing MSHA data.
That should help recover supplies into strong high-vol B contract demand, which saw growth in 2019 contract volumes.
Buyers plan to increase contract volumes for high-vol B for plants in Europe and Brazil, where some quantities were previously procured under shorter-term tenders and spot inquiry, sources said.
U.S. domestic demand for high-vol A and other better quality high-vols and mid-vols was being supported by coke shortages and steel rates, sources said.
Along with stronger Indian purchasing for U.S. mid-vol blend in Q1 reported earlier, a 20% decline in Q4 output at Arch Coal's Leer Mine and with the outage at Ramaco's Elk Creek limited quantities for prompt spot export sales. Arch made a longwall mining section change at Leer in Q4, the company said.
With limited spot offers and steady demand, tradeable prices for high-vol A are largely affected by values of alternative premium low-vol and mid-vol delivered to the Atlantic.
"Traditionally when premium low-vol or mid-vol is not available or rise in price, Atlantic buyers tend to buy more high-vol A," a miner said.
Japan may be set to continue to buy more U.S. coals, in line with the rise in U.S. met coal exports to Asia's biggest buyer in 2018, according to a buyer. U.S. met coal shipments to Japan were running at around a 20% increase in 2018, based on latest U.S. customs data.
Contract volumes to one group were indicated to be steady in 2019-2020 and at higher shipment levels than in 2017-2018.