Fri, April 3, 2020 9:55 pm

As this is not the time nor the place to make light of the uncertainty we all face, we will simply say “Be Well” and know that we are here doing all we can to provide insight and clarity in these strange times. May we all find our way to the other side of this safely. ~Team DTC

  • New and Improved! DTC Supply & Demand Forecast Updated: This month we are debuting a new format for our S&D Forecast, one that we believe better aligns with the changing landscape of the US coal market. You’ll find it along with our usual commentary on pages 9 – 11. All appearances are that 2020 will be a “red-letter” year for many reasons. But for coal, it is already shaping up to be one of the most transformative in the long history of the industry. Unusually low natgas prices at the start of the year along with a mild winter and increasing renewable generating capacity already spelled trouble for coal. Then the coronavirus pandemic and its effect on global economies came like an unsuspecting left-hook.
  • Global Thermal Market Forecast: Chinese coal consumption remained muted. Demand has collapsed elsewhere throughout the world as quarantining and stay at home orders affect demand. In the past week alone European power prices fell 30-40% while French power consumption was forecast to fall roughly 20%. After lockdowns in India were enacted, Indian peak power demand fell by an estimated 25% as Coal India mulled output cuts due to COVID-19 quarantines as stockpiles hit a record 74mm MT and inventories at power plants hit 44.7mm MT an all-time record. Clearly the demand picture is, to put it mildly, challenging. As we reevaluate our JFY 2020 forecast, however, we cannot just look at demand. Supply is being hit hard by COVID-19 as well. You’ll find more commentary and our JFY 2020 price forecast on pages 65 and 66.
  • Seaborne Met Challenged from Demand Erosion Due to COVID-19: We have compiled a list of steelmakers that have idled blast furnace production. It is already long and getting longer. Check it out, along with our quarterly met settlement forecasts, on pages 79 and 80. We have not seen the same magnitude of response on the supply side across the globe, save for the US. By DTC’s count roughly a third of US coking coal production is temporarily idled due to COVID-19, we are having a hard time finding virtually any announced coking coal mine idlings outside of the US due to COVID-19).
  • EIA Q4 ’19 Revisions: Just in the nick of time to make the April edition, the EIA issued its Q4 ’19 production revisions to match reported MSHA data. DTC was estimating an upward move of 0.79 mm tons which was not far off from the EIA’s downward move of 0.01 mm tons. A complete recap is found on page 15.
  • Japanese Primary Steelmaking Capacity Reductions: Japan’s second largest steelmaker, JFE Steel, announced last month its intention to idle one of eight currently operating blast furnaces. In doing so, it joins larger rival, Nippon Steel, which in February detailed its plans to trim its steelmaking capacity. Collectively, when completed, these capacity reductions will eliminate approximately 20% of Japan’s 2018 installed crude steelmaking capacity, almost 130 mm MT/yr. While these reductions will take time to implement, they may by mid-decade diminish opportunities for U.S. met exports to Japan, which by volume last year was the second largest destination for U.S. steelmaking coals after Brazil. Please turn to page 75 for insight on what is causing Japanese primary steelmaking capacity to contract.
  • S. African Lockdown Forces Anglo American Cutbacks: Following the commencement of South Africa’s 21-day nationwide lockdown, Anglo American said it will reduce its workforce by 50-70% at its South African Thermal operations and by 20% at its Isibonelo mine, which supplies Sasol’s fuel production facility. AAL noted that rail and port logistics infrastructure that supports the export of iron ore and coal is expected to continue services during the lockdown. As a result of the lockdown and ramp-up of operations thereafter, AAL expects export thermal coal volumes will be 1.5 – 2.0 mm MT lower. The full recap of thermal production cutbacks in the seaborne sector begins on page 57.
  • COVID-19 and Output Cuts and Bankruptcies, Oh My! Company announcements were plentiful this past month, which saw a number of domestic producers announce production cuts and idling of operations, mostly for two-week periods, in response to COVID-19-related concerns. On the bankruptcy front, Foresight Energy filed for chapter 11, and there were a few updates from Murray’s proceedings. To peruse domestic producer and equity-related coverage, including earnings results from Contura, Corsa and Hallador, please head to page 89.
  • Conference Cancellations and Postponements: Many industry conferences and events have been postponed and/or cancelled and those that have not yet, remain vigilant on news and progress of the coronavirus outbreak. Turn to page 122 to see the full list of conferences, along with notes on changes.

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