Fri, April 4, 2014 9:12 am
DTC reports on coal meeting read more below
Ted attended the North Carolina Coal Institute’s Spring meeting in Charlotte today and caught up with many of our Capp friends. The event attracted many big hitters and featured presentations from Bob Murray/Murray Energy, Paul Vining/Alpha Natural Resources, and Joe Czul/Logan & Kanawha, among others. The attendees were more optimistic than prior years, but far from exuberant. The industry is waiting for natural gas to move higher, as nearly everyone thinks it will need to in order to refill storage. The ‘what happens in Capp, stays in Capp’ adage applies, but below are a few key takeaways.
- East Coast Exports – Strength Continues: Exports from the East Coast may surprise to the upside in April and May, as the backlog of vessels from Q1 is significant. The Hampton Roads piers each have 7 vessels at anchor right now (double what is ‘normal’ in most cases), with some vessels waiting up to two weeks to load. Exports will fall when the backlog is worked through, but there are different views as to whether it will be a sudden decline, or gradually slide throughout the year.
- Murray’s Napp Growth: Robert Murray/Murray Energy plans to increase production from the 6 longwall mines he purchased from CNX to 36.7 mm tons in 2014 from 28.6 mm tons in 2013. Murray thinks they can eventually hit 40 mm tons.
- Met Could Surprise to Upside: Joe Czul, President of Logan & Kanawha, delivered a very somber assessment of the coking coal market. Despite the ‘grim reaper’ forecast in his head, Czul’s ‘trader’s nose’ says the market is more in balance than people think, and something could surprise to the upside.
- ANR Adjusts in Weak Market: Paul Vining, President of Alpha Natural Resources, highlighted how cost-conscience the company is right now by saying they have 1,000 pieces of equipment stored in a few equipment depots, which has prevented them from having to buy things like continuous miners over the past year.
- Capp into API 2: Vining noted that ANR has some Capp thermal coal that can price into current API 2 levels, though not much.
- Cumberland Rail Load Out: Vining highlighted ANR’s development of a barge to rail facility at their Cumberland mine to serve the Pitt 8 rail market as the Emerald mine nears the end of its mine life. The dual-served facility will be ready at the end of this year, and develops a new market for low-cost Cumberland coal (cash costs below $30/ton when longwall running well).
- Utilities Under Attack: Sasha Weintraub/Duke Energy shared his thoughts that utilities are under attack, but in a different way from the coal industry. As customers install solar panels, and unreliable renewables increase their market share, it is very difficult for utilities to manage load, let alone plan for how the grid will look in 5-years.
- Eastern Rail Woes: Transportation woes in the East have drawn criticism from all sides of the market, but operations in March were better than Jan/Feb, and improvements should continue with warmer weather.
- Utility Stockpiles Near Inflection Point: Without question, stockpiles at Southeastern utilities were drawn down in a major way this winter, and reports of plants with less than 10-days of coal on the ground are not uncommon. Some utilities are cycling back their coal units to preserve stockpiles in the East, though buyers haven’t expressed any real ‘fear’. Abundant supply from Napp and Ill Basin is keeping buyers at bay, with hopes that rail service will improve.
- The Start of Spring Restocking: Southern Company issued an RFP today for 4 mm tons of Eastern coal from Q2 – Q4. Ill Basin is expected to win a majority of the business but Capp and Napp should each have a share. Is this the first of what will be an active spring of RFP’s? Time will tell but some think it is inevitable.