Wed, October 10, 2018 9:15 am

Well here we are on the leading edge of Q4 while also in the waning months of the year. 2018 has been almost as crazy as Mr. Toad’s Wild Ride! Just as quickly as anyone thinks they have a handle on where this thing is headed, we take another sharp turn and get up on two wheels. We cover much ground this month as we look ahead to Q3 earnings while also getting our bearing on how the year will play out and what to expect in 2019. We invite you to grab your favorite pumpkin flavored treat and flip through the attached 137 pages and of course, hold on! ~Team DTC

  • Expectations for 2020 Added to DTC’s Supply & Demand Forecast: As is typical around this time of year, we extended our forecast out by one year to 2020. Some key expectations for 2020 include the weakening of domestic thermal demand and the resulting impact on production form the PRB and ‘Other’ regions, the continuance of stockpiles to remain at a steady state equilibrium, the softening of thermal coal exports (though we expect US producers to aggressively push coal overseas even in a weak price environment) and the tapering off of coking coal exports if the trade war subsides. You can find additional Supply/Demand adjustments and commentary starting on page 13.
  • In Case You Missed Us: DTC spread out like locust in September, hitting many of the industry’s headline conferences. We returned with lots of great color from both presentations and from conversations with attendees, presenters and you, our clients! If you missed any of our recaps, we have included them on page 7 for reference.
  • Despite Regulatory Roll-back, Coal Retirements Advance: Regulated utilities in North Carolina, Indiana, and New Mexico are continuing to shift away from coal in recently filed resource plans, while low power prices pressure merchant operators in the near term. This month’s grim toll on coal units is in US Electric Power Sector news on page 28.
  • Physical Coking Coal Trading: globalCOAL’s met coal product HCCA (high quality mid vol hard coking coal delivered FOB Australia) saw in September its highest monthly tonnage in physical tons traded YTD.  By contrast, September 2017 saw no trades on the platform. Jan-Sep trades totaled 1.36 mm tons, versus 1.33 mm tons for all of 2017. Turn to page 90 for details of September’s trades.
  • Peabody to Acquire Shoal Creek: The coal M&A scene heated up again in September with Peabody Energy (BTU) announcing it had entered into a definitive agreement to purchase the Shoal Creek mine in Walker County, AL from the Drummond Company for $400 mm, setting Peabody on course to enter the US met market by year end. Other equity-related news can be found starting on page 102.
  • Seaborne Met Market Heats Up: Driven by elevated Chinese coking coal imports and the disruption at Peabody’s North Goonyella mine in Queensland, seaborne coking coal prices rebounded in response and drives our expectations for the FY Q4 2018 (Jan – Mar 2019) settlement to come in around $198/MT (up from last month’s estimate of $195/MT). Read more on page 94 about our prognostications, including our take on Chinese demand and how we see it offsetting issues in emerging markets like Turkey and India.
  • DTC Continues to Rack up Miles: This month we’ll continue our torrid pace of travel to industry conferences, with CEO Hans Daniels heading west to IHS Markit and Xcoal’s inaugural North American Export Coal & Gas Summit in San Francisco, CA followed by Director of Client Services Vicky Bray and Head of Market Analytics Andy Blumenfeld traveling to Barcelona, Spain for Coaltrans’ annual World Coal Conference during October 14 – 16. To see a complete list of upcoming industry events, please flip to page 134.

Clients can access the report in the subscriber area. For more information on how to access the Monthly Update or to sign up for a free, month-long trial, please contact Ben Coleman (Bcoleman@doyletradingconsultants.com, +1.646.957.8894).