DTC Coal “Week Ahead” Flash
Catalysts We are Watching
Each Monday we provide you with a concise preview of the key events taking place in the coming week that will have the biggest impact on the coal markets. We outline the major data releases and events that you need to know about complete with our expert opinion to make sure you are prepared for the week ahead.
Catalysts We are Watching:
- Coal Equities Catch a Bid: Coal equities reversed their recent free fall last week, as Arch Coal (ACI) rose 205.56%, Peabody Energy (BTU) rose 57.52%, CNX Coal Resources (CNXC) rose 9.95%, and Cloud Peak Energy (CLD) rose 9.54%. News that George Soros’ Soros Fund Management initiated positions in ACI ($213K at end of Q2) and BTU ($1.83 mm at end of Q2) caught many coal bears by surprise, and reports that ACI is seeking a compromise with lenders to complete their proposed debt swap sparked optimism that the equity may have more value with a longer debt-runway. We believe short covering in BTU, the sector’s most-shorted company, contributed to its rally, and heard some speculation that traders were covering very profitable shorts in coal, to short other sectors in the broader-market meltdown. The coal MLPs continue to trade with very high implied yields (Foresight Energy (FELP)/24.00% and Alliance Resource Partners (ARLP)/10.90%), suggesting yield-seeking investors have doubts about the ability of each company to maintain their distributions. We’ll see how the equities react in light of the global market selloff the market is enduring this morning.
- China ‘Net Neutral’ In Seaborne Met Market in July: China’s coking coal imports climbed to a YTD high in July (6.66 mm MT, up 26.9% seq pd and 31.9% YoY), and the follow-through from June’s strength suggests the country is relying more heavily on imported material amid weak seaborne prices. The uptick in coking coal imports resulted in China’s role as a net-exporter of coking coal equivalent material (coking coal imports, offset by coking coal contained in steel and coke exports) narrowing in July to 105K MT, down from 868K MT in June and 414K MT in July ’14.
This report also looks at:
- JFY Q3 Coking Coal Benchmark Approaches
- Global Thermal Prices Approach $50/MT
- Fire at Nippon’s Kawasaki Steel Plant
- More Cool Weather for Midwest
- Natgas Falls as Shoulder Season Approaches
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