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Alliance Boosts Higher-Priced Exports in Q1 Amid Low Domestic Demand



May 3, 2023 - US-based Alliance Resource Partners shipped more coal to higher-priced export markets in the first quarter of 2023 as domestic utility customers rolled their committed tonnage forward amid low natural gas costs, the company said in a May 2 earnings call.

"With the natural gas prices being where they were ... several of the utilities did flex down under their contracts," Alliance Resource Partners CEO Joseph Craft said. "That has opened the door for us to just ship more tons in the export market, which in total actually is a higher price than we would have gotten had they taken the tons under the domestic contracts."

Illinois Basin and Appalachia coal sales prices increased by 26.1% and 80%, respectively, from the first quarter of 2022 due to improved price realizations in both domestic and export markets.

In its full-year guidance, Alliance said it expects to produce 38 million st, of which 25.5 million st to 27 million st will be Illinois Basin sales tons and 10.5 million st to 11 million st will be Appalachia sales tons. For 2023, Alliance reported 34.3 million st already was committed and priced, of which 30.1 million st was for domestic and 4.2 million st was for export markets. The coal sales price per ton sold was estimated between $65 to $67, according to the company's May 2 earnings report.

Alliance CFO Cary Marshall said the company expects most of its sales activity for 2023 unsold tonnage will happen in the back half of the year as the summer peak demand season unfolds.

"We do now expect that most of this available tonnage will be supplied to the export markets as domestic opportunities appear more limited due to the mild winter weather and current utility inventory levels," Marshall said.

Craft said he sees the company's domestic customer base to remain stable for the next five years even as coal plants retire, because remaining coal plants will need to run at higher capacity factors as electrification grows.

"We anticipate the electric generation will grow over the next decade for that matter," Craft said. "As a result, they're going to need to keep these coal plants either running or those that remain that are trying to fill the void for some that have closed at higher capacities."

Alliance had a total coal inventory of 1.3 million tons at the end of the first quarter of 2023, up 800,000 st on the quarter but 300,000 st lower than the year-ago quarter, the company reported in its earnings report.

"As we move towards more export tonnage, we have secured the infrastructure, the capacity at the ports, to be able to have our coal store to be ready for vessels when they come in," Craft said. "So based on the size of the vessels, which are larger, obviously, than the railcars, that does require when we have shipments towards an end of a quarter to have to build our inventory to meet the shipping schedules of these export movements."