More US metallurgical coal to exit the market: analyst

Due to low prices and weak demand, Seaport Global equity analysts Mark Levin and Nathan Martin said that “it’s just a matter of time before more US met coal production exits the market,” according to a research note.

Levin said there is fierce competition among US and Australian producers to move met coal, but prices are at “levels at which we expect to see production come offline.”

Last week, Murray Energy idled its Maple Eagle high-vol A mine in Fayette County, West Virginia, according to the note.

The mine, which was purchased by Murray from Mission Coal Company in March, produced a two-year high 181,161 st in Q2, according to data from the US Mine Safety and Health Administration. However, in the first half of 2019, the mine produced 281,047 st, down from 318,825 st in H2 2018.

“Market chatter is building as to who may be next and how many tons would come out if these prices persist,” Levin said. “The picture isn’t pretty.”

“The market needs a rebound, but it may not happen until late Q4/early Q1 [2020],” Levin added. “The hope is that pre-rainy season buying, in combination with an expected December 31 end to Chinese import quotas, leads to a restock.”

Seaport Global expects US met coal production to total 73.3 million st in 2020, down from its 2019 forecast of 75.5 million st and 79.8 million st produced in 2018.

“US producers are now having to compete with the Australians to move tons,” the note said. “The Australians have a major currency advantage, as well as freight advantages into key Asian consuming markets, where the US generally has the upper hand is moving coal into Europe and Brazil.”

US met coal exports are expected to fall to 55.4 million st in 2019, from 61.5 million st in 2018, according to the note.

In 2020, exports are estimated at 53.1 million st, according to the Seaport Global forecast.
Source: Platts