Fri, October 6, 2017 12:22 pm

We made the rounds last month and touched base with many of our colleagues and friends face to face. Despite the weather posing some unexpected challenges to end the summer, most folks we visited with are cautiously optimistic that the market is improving. We put all that good color to good use and updated what we were thinking accordingly. We invite you to scroll through the attached 140 pages and see if you agree. Our emails are open, should you have questions. Cheers to Q4!

  • DTC Supply/Demand Forecasts: As we typically do each fourth quarter, we’ve extended our forecast strip another year to 2019. Aside from a couple smaller changes, the major adjustment in this month’s forecast is our downward revision of utility demand. US power demand from all fuel sources continues to disappoint and recently there were 16 consecutive weeks (June 10 through Sept 23) where weekly power demand was lower than the same period last year. Our Supply & Demand Forecast, along with commentary explaining the rationale behind our changes can be found on pages 12 and 13.
  • Outlook for Global Benchmarks: While September was an interesting month for the market, there will be more affecting our benchmark forecasts following the conclusion of China’s 19th National Congress, a leadership transition event that occurs twice in a decade and is set to kick off on October 18. A majority of China’s top decision makers, the Politburo Standing Committee, is set to retire at this congress and could result in government policy changes. As such, for now we have left our thermal estimate unchanged at $82/MT for the JFY 2018 (April 2018 – March 2019). On the met side, we are also reiterating our $160/MT outlook for JFY Q3 2017 (Oct – Dec), with a backwardated curve for the following two quarters. Turn to page 89 to see where we’ve marked JFY Q4 2017 (Jan – Mar 2018) and our initiated estimate for JFY Q1 2018 (Apr – Jun 2018)
  • DOE Weighs in On Coal Gen Support: The Department of Energy has sent FERC its suggestion for what a baseload generation support mechanism might look like last week.  Meanwhile, plans advance for coal retirements, none of which would be covered by the DOE’s strategy. Coal-fired generation news is on page 26.
  • Baltic Index Surges at the End of Q3: The Baltic Dry Index hit the highest level in our records dating back through 2015. The 1503 mark was hit on September 22nd and although it has fallen 12% since then, the index remains at a robust level and is up nearly 50% YoY. The index, which accounts for capesize, panamax, supramax and handysize shipping vessel rates, saw a boost right before China’s Golden Holiday that takes place during the first week of October. Before the holiday, coal and iron ore buyers were re-stocking Q4 supplies which helped provide a temporary boost to the index. More on page 98.
  • Hang Ups Hit US Transportation: September was a tough month for all manner of US transportation. Hurricanes Harvey and Irma interrupted service for many of the Class I rails. At the same time, low water and issues with locks are snarling barge traffic on the Ohio and points below. You can find complete coverage of all these items beginning on page 61.
  • EPA Moving Ahead on CPP Rollback: The EPA’s report to the D.C. Circuit Court on the status of the Clean Power Plan this week is expected to indicate that it will propose scrapping the rule, followed by solicitations for replacement ideas. Emissions and Regulatory News is on page 99.
  • We Are Everywhere! Well that may be a slight exaggeration but we are certainly logging some travel. Phil Wagner will address the attendees at the Hampton Roads Coal Association this week. Later in the month, Hans and Andy jump the pond to attend Coaltrans’ World Coal Conference while Charles Dayton will be speaking at the Coal Institute Fall Seminar. If you plan to be at any of these events, please take a moment to say hello!