By leveraging its large-output, high-vol A mines, Arch Coal is better
positioned to take advantage of the latest surge in metallurgical export
prices than most US miners, the company's CEO said Wednesday at the Coal
Transportation Association's Spring Conference.
In his presentation, John Eaves highlighted the dramatic price increases
seen off the US East Coast since Cyclone Debbie blew through Australia and
washed away infrastructure to disrupt transportation to ports.
He noted that with expected railroad delays of up to five weeks in
Australia, US met export prices are rising so fast that figures used in his
presentation pulled from indexes just days earlier were already out of date.
"In the last couple weeks we've seen a pretty significant uptick," Eaves
said. "Prices are up $15 to $25 a day and continue to run. We don't think
that's sustainable, but were trying to capture some of that value as we see
High-vol A prices gained another $10 on Wednesday to increase to $285/mt.
High-vol A pricing has surged $122.50, or 75.4%, since March 31 and surpassed
the year-ago high of $265/mt seen in mid-November.
Arch's Leer mine is the largest high-vol A mine in the US, and its
Sentinel mine ranks fifth in output. Both mines are in West Virginia.
US Mine Safety and Health Administration data showed Leer produced almost
3.6 million st last year and about 830,000 st in the first quarter this year,
while Sentinel's output totaled 1 million st in 2016 and 347,000 in Q1 this
year, which marked its highest quarterly output in five years.
While Arch is able to increase production from longwalls at Leer, many
other US producers would likely struggle to ramp up output to meet new demand,
especially of high-vol A grades, Eaves said.
Central Appalachia has lost about 30 million st/year of met production
since 2013, the CEO said, and while Arch expects output to increase about 7
million st this year to 66 million st because of the seaborne market, a
majority of the coal coming online will be of lower quality.
Much of current met production has already been committed to deals made
in the past eight months since the revitalization of the market, and companies
looking to hire employees, even Arch, have struggled to find skilled workers
as many miners laid off during coal's downturn have left the business
altogether, Eaves noted.
"It's going to be tough, but people are going to bring any meaningful
production online," Eaves said. "Everybody's going to look at what they can do
-- but we see a real high-vol A scarcity."
In what has become a much more balanced global met market, Eaves said
that in the past few years miners have learned "when there is a real
interruption in transportation or production -- up or down -- it can have a
real impact on prices."
--Jim Levesque, email@example.com
--Edited by Annie Siebert, firstname.lastname@example.org