Mon, November 6, 2017 10:23 am

Though still a few miles down the road, we are beginning to see the finish line for 2017, but between now and then Team DTC has a ton of exciting items left on our to-do list to cross off. We are looking to grab that highest gear as we spread out all over the country for meetings, conferences and speaking engagements all ahead of our DTC Luncheon in early December. For us, there is no better way to say thank you for your loyal support than to bring you the best color available!

  • DTC Supply/Demand Forecasts: Cooling degree data confirms a mild summer that resulted in weak power demand, causing us to again lower our estimate for 2017 utility coal burn. Offsetting that is US thermal coal exports, which continue to show robust improvement over 2016, with 25.7 mm tons exported in the first eight months this year (up 156% YoY). Additionally, strong seaborne thermal pricing continues to make US exports profitable, even in the prompt year and to reflect this trend, we have adjusted our forecasts for 2017, 2018 and 2019 US thermal exports. Our complete Supply & Demand Forecasts can be found on page 8.
  • Supply Issues and Increased Appetite for Thermal Coal: The international thermal market continued to be an interesting topic in October. Protests with Australia’s dominant rail provider Pacific National and outages on Australia’s Ulan railway produced supply concerns while India turned to imports, reversing its previous goals, to help ease domestic coal shortages. These situations along with several other events has left the industry wondering where prices will go from here.
  • ERCOT Shedding Coal Capacity: Over 4 GW of coal capacity in ERCOT has been added to the retirement list, as Texas merchant generator Vistra Energy (VST) looks to expand its horizons beyond ERCOT by absorbing Dynegy (DYN). Coal-fired generation news is on page 26.
  • The Rails Rebound in Q3: Nearly all the Class I rails have provided Q3 updates and the news is good thanks to increased demand from the seaborne markets. Traffic has returned to normalcy following disruptions from Hurricanes Harvey and Irma and CSX has its groove back with a new way of doing things. To see all our coverage for the railroads, flip to page 63.
  • Q3 Earnings Recap: We’re nearing the finish line in this year’s Q3 earnings season with reported results in October from ARLP, ARCH, CLD, CNXC, BTU, TECK, and WLB. For most producers, Q3 saw increased sales on the back of strong international demand and increased global prices, with a few producers suffering from longwall and operational issues. A complete list of earnings summaries for domestic coal companies starts on page 111.
  • Baltic Dry Index sets YTD High in October: Strong chartering activity during the month pushed the index to a high of 1586 on October 23 as bulk vessel demand for the month was strong across key commodities: iron ore (continued elevated export levels from Australia, first eight months up 13.5 mm MT YoY), grain (large U.S. harvest), and coal. Ocean freight is on page 106.
  • Global Outlook: With the conclusion of China’s Communist Party meetings and ongoing labor unrest at Glencore’s Hunter Valley operations, South Africa’s National Union of Mineworkers and Pacific National railway, we’ve given our forecast for the fiscal 2018 seaborne thermal benchmark an adjustment, albeit still with a bearish bias. Turn to page 86 to see our changes. On the met side, steel capacity cuts continue in China while global growth forecasts elsewhere are looking better than expected. As such, we have reiterated our JFY Q3 2017 (Oct – Dec) hard coking coal forecast, leaving it unchanged at $160/MT. Check out our estimates for the next two quarters on page 98.
  • Divide and Conquer! Before descending on NYC in full force for the CTA conference, DTC Luncheon and NYCTA meeting in early December, DTC will employ the divide and conquer strategy this month. Dianna and John are heading to the MetCoke Summit in Chicago next week while Geoff takes to Houston for The Heartland Institute’s America First Energy Conference. Our comprehensive list of upcoming conferences starts on page 159.

Please contact Steve Ristevski at sristevski@doyletradingconsultants.com or (212) 520-2774 for the full report.