Coal Exports

Alpha Natural (ANR) reported results and had their conference call.  Let’s just say they’re in trouble.  Much of the industry rationalization in this down cycle is going to come at their expense as the strong eat the weak.  I’ll have more to say on ANR soon.  Stock charts of ACI and CLD.  The essay Consol Energy: Solid Yet Underwhelming was written by me, JJ Butler.

Our interest in the US coal market is based on a cyclical upswing from depressed levels driven by natural gas, inside a structurally difficult US coal market.  But the world is in a secular supercycle experiencing a soft patch (Bloomberg).

The soft patch is real with much coal commentary at the end of this piece at Reuters.  In China, “Prices can only start to rebound when the hydro power season ends in around September. Since Chinese power plants usually start their winter restocking in around October, that could be a crucial turning point for coal.”

In India, “Steam (thermal) coal imports are projected to climb to 80-85 million tonnes (mt) this financial year, a jump of 60 per cent over the 50 mt in 2011-12 as power producers, chiefly NTPC, seek to overcome domestic supply woes.”  Business Standard  The world’s largest coal company is state run Coal India which is unable to produce its quotas (Fox).

But markets work.  “Rio Tinto Coal Australia said Wednesday it would close earlier than expected its Blair Athol mine for export thermal coal in Queensland’s Bowen Basin coal field, partially blaming falling international thermal coal prices.”  Platts

Australian coal is becoming high cost, while strong US players are looking ahead, such as Peabody and Kinder (Marketwatch).

The industry is serious about shipping PBR coal to Asia.  “Business groups backing Pacific Northwest coal export proposals on Thursday lauded a new report that claims increased U.S. coal exports could bring between $2 billion and $6 billion per year to the U.S. economy.”  The world improvers will try to stop it (Seattle Times), but the trump card will be jobs.

The greens will not escape reality, as even in Europe “Twenty-three new coal-fired power plants are being built across Germany, with the capacity to generate 24,000 megawatts.”  SBO

Westerners do not grasp the enormity of the infrastructure needed in developing nations.  This WSJ piece has a nice slide show from the current flooding in the Philippines.  My Filipino friends have posted better pictures on facebook: