Mon, June 12, 2017 8:40 am

Despite summer still being a few weeks off here in the Northern Hemisphere, things are heating up all over the coal space. In the US, there is sentiment of cautious optimism as market participants leave mild weather in their rearview mirror and look forward to increased coal burn and declining stockpiles brought on by seasonal temperatures. Globally, the met market is subdued given the recovery of the Australian supply chain and prices continue to remain soft while the market awaits an outcome from benchmark negotiations. We wish everyone a long, hot and humid summer—full of air conditioners blasting 24/7, fans spinning at full tilt and swamp coolers on high!

  • Coking Coal Benchmark to go Index? One of the most interesting (and controversial) market developments currently is the proposal by Japanese coal buyer Nippon Steel to forego the quarterly benchmark in favor of adopting index-based pricing. BHP Billiton has been pushing the market in this direction for years, but other Japanese buyers are holding out since it would create complications with purchasing and contracts already in place. Given the uncertainty and delay, we are doing something we’ve never done before with our JFY Q1 coking coal benchmark estimate.
  • Supply/Demand Changes: This month we made some small but meaningful adjustments to our forecasts for expected supply from the Illinois Basin, the PRB and Napp, while also revising utility demand estimates.
  • So Maybe We Won’t Always Have Paris: The Trump Administration announced this month that the US would cease implementation of the Paris Climate Accord and seek to withdraw from the agreement. The international coal market implications could get complicated, but the US electric power sector seems unlikely to re-embrace coal anytime soon. Several coal unit retirement plans advanced unabated this month across the country this month.
  • DTC Issues Q1 Revision Estimates: Each quarter we issue our revision estimates ahead of the EIA truing up their production to match reported MSHA figures. We currently expect the EIA to revise total US production downward by 2.22 mm tons.
  • Natgas Prices Edge Down on Mild Spring: Natgas generation costs held the advantage over coal in most regions at the end of May, as prompt month Henry Hub futures shed 6.3% during May to end the month at $3.071.
  • Q1 Earnings Conclude: May was a busy month for domestic earnings. You can catch up on all the happenings beginning on page 112. We have also revamped our Mining Costs Table to include all the changes that have taken place.
  • Coal Conferences Heat Up Too: After attending the Inland Marine Expo, the Eastern Fuel Buyers conference and the Hampton Roads event in May, we are taking a short breather but the summer conference circuit is just getting started! Upcoming events like the EIA conference in DC and the Coal Institute’s Summer seminar are right around the corner.