DTC Coal “Monthly Update” Report
Monthly Summary of Critical Market Data and Trends
Each month DTC publishes a comprehensive update of Coal and Emissions through this 150+ page report that our clients use as an important reference tool. It aims to look in depth at all the major questions you may have from every angle giving you the most complete set of answers available.
It provides you with crucial supply and demand forecasts, production and reserves by region, a recap of all of the domestic and international coal prices as well as covering the emissions markets and coal and utility equity.
DTC Coal & Emissions Monthly Update©: December 2017
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December has come around again (it seems to happen more quickly each year). We are spending this week in New York City attending the ACC Coal Trading Conference, hosting our DTC Coal Q&A Luncheon and witnessing history as our own Dianna Ridgway becomes the first female to be seated as President of the New York Coal Trade Association (NYCTA). We will be visiting with many of you in person, but for those we miss, please accept our sincere thanks for another amazing year of being able to provide you with best in class coal market analysis. We cannot wait to exceed your expectations in 2018! Wishing you all a safe and warm holiday season.
- DTC Supply/Demand Forecasts: With just a few weeks left in 2017, we have largely shifted our focus to mapping out expectations for next year. The major adjustments in this latest forecast are an increase in thermal exports and another downward revision of utility demand. We increased production for Capp, ILB, CO/UT and Napp and decreased expectations for PRB and Other.
- Global Benchmark Forecasts Largely Unchanged: A new month brings a new month of concerns and market drivers. After rationality prevailed and labor unrest in South Africa has subsided, the seaborne thermal market has turned its attention to the news coming out of India regarding its ban on the use of petcoke. While the ban possibly justifies somewhat of a seaborne thermal price hike due to the tightness of seaborne thermal supplies, we feel expectations of it leading to a new era of massive Indian thermal imports are overblown. As such, we have left our forecast for the fiscal 2018 global steam coal benchmark unchanged at $85/MT. Turn to page 77 to learn more. On the met side, production disruptions and an extended lengthy vessel queue at Dalrymple Bay Coal Terminal, in addition to elevated Chinese buying activity has caused us to adjust our outlook, but only in the short-term. We raised our JFY Q3 2017 (Oct – Dec) forecast by $10 to $170/MT while leaving our JFY Q4 2017 (Jan – Mar) and JFY Q1 2018 (Apr – Jun) estimates unchanged.
- DTC’s Q3 EIA Revision Estimates: We anticipate the EIA will publish its Q3 production revisions to match reported Q3 MSHA production in late December. We are estimating total production will be revised downward by 10.13 mm tons.
- Thermal Market Robust in November: Thermal prices remained at healthy levels in November with all of the major thermal indices ending the month at the mid-$95/MT level, buoyed by a few physical trades near the $100/MT mark. The Newcastle physical market traded at $94.50-$100/MT with 150K MT conducted during the month. Ongoing talks of strikes on the supply side in South Africa created uncertainty that helped keep Richards Bay physical prices above $90/MT throughout November.
- Coking Coal Trades hints at Market Tightening: After two months without any trades, November saw two physical trades on the globalCOAL platform, suggesting within the span of less than two weeks an increase of $15+/MT in the spot market. Supply disruptions and resilient Chinese buying are believed to be driving the market higher and are expected to keep prices elevated in the near term.
- Coal Retirements Continue Unabated: Coal units totaling 1,758 MW in Wisconsin and Kentucky were added to the retirement list, while others in the western US risk closure if they are not sold. On the bright side, colder weather in November has positively impacted coal generation, with preliminary data from PJM, MISO, and SPP showing coal generation flat or up YoY after several months of declines.
- Q3 Earnings in the Rearview Mirror: Q3 earnings finished off this past month with results from CNTE, HNRG, FELP, HCC, and more. CONSOL Energy also completed its anticipated spin-off into CNX and CEIX while also changing CNXC to CCR. Equity coverage starts on page 104.
DTC’s Monthly Coal & Emissions Update seeks to address all of these issues and help you accurately answer the questions that arise through market developments.