What a week to schedule a vacation! China steel producer Baowu said today that the country’s steel industry is facing a "long winter" that may last longer than expected, and that has caused met coal markets to take another leg down. With healthy balance sheets and declining price-related costs, most mines are still positive margin down to $180-190/tonne PLV. But once SG&A/CAPEX start to eat into cash balances, production cuts will begin to occur on both the coal and steel sides, and that’s probably what we need to see to put in a cycle bottom in the entire sector.
But given that export volumes have remained robust even as price has fallen, either more buying from India or a supply disruption (or both!) can help stop the bleeding in the short term. Gonna be a few more weeks still before that happens, so no need to back up the truck here even despite the attractive prices.
Can't remember I've seen any discussions regarding the Anglo Coal sale process. If you have written about it before I apologize. What price do you think is reasonable for those assets? Around 16mtpa in QLD, mix of HCC and PCI it seems. Did around 0,6bn USD in mine EBITDA for H1'24. Around 4bn USD in price? Seems at least YAL is interested. They only have a cash balance of 1bn USD so need some debt and sellers financing maybe like the WHC acquisition. Would be interested to hear other people's thought.
Thanks Matt! Would be interesting to hear your thoughts. I'm interested in adding YAL after the sell-off but want to do a bit more work on the potential Anglo transaction. Saw an article listing Glencore, SMR and GEAR as other suitors
Matt, I’ve got to say, your work on coal is top-notch. I’m new to the scene, but after stumbling upon your posts with Pabrai, I found myself diving headfirst down the coal rabbit hole.
I’m on board with the growth thesis for HCC, and I see the big picture with AMR, but I’m scratching my head over what makes ARCH stand out. It’s in both Pabrai’s and Guy Spier’s portfolios, and it’s got me wondering—what’s the secret sauce that you all see in ARCH?
When not fighting geology at Leer or logistical outages beyond their control, they are the lowest cost provider to the market of high quality HVA metallurgical coal, once the domestic contracts roll off at West Elk then they’re exporting another 1-2 Mst of NEWC spec coal off the West Coast, and the PRB - while I do have concerns - is also a call option on increasing domestic baseload power demand.
Matt - Would you maybe be up for writing a piece on thermal coal - some time after you get back from vacation? I could be wrong, but is the market sleeping on thermal coal as met coal seems to be getting a lot of attention from folks on X, etc.?
Thanks Matt for the update. Not sure if there has been a recent update but I recall that Grosvenor closure should start impacting sales in calendar Q4 (with inventory covering sales in Q3). When you return, can you provide an update on the status of the Longview Mine?
Yes Grosvenor tons are stockpiled for delivery through Sept. Longview remains down indefinitely...have heard there was damage to the longwall so it's a year or two at least, depending on how much it is to repair and if they have access to enough capital to get it done.
I have seen capacity numbers for Longview listed as 3.3M tons of high vol A met coal. Add that to the Grosvenor total of at 3.5M+ tons, that seems like a pretty serious hit to supply to offset weakness in demand.
It's spread out proportionally to production...but the US only exports about half a million tons per month of coking coal to China, and a lot of that comes from traders.
Hi Matt,
Can't remember I've seen any discussions regarding the Anglo Coal sale process. If you have written about it before I apologize. What price do you think is reasonable for those assets? Around 16mtpa in QLD, mix of HCC and PCI it seems. Did around 0,6bn USD in mine EBITDA for H1'24. Around 4bn USD in price? Seems at least YAL is interested. They only have a cash balance of 1bn USD so need some debt and sellers financing maybe like the WHC acquisition. Would be interested to hear other people's thought.
Hey Richard - don’t know offhand as I’m still out on vacation. Will maybe do a piece when I get back though
Thanks Matt! Would be interesting to hear your thoughts. I'm interested in adding YAL after the sell-off but want to do a bit more work on the potential Anglo transaction. Saw an article listing Glencore, SMR and GEAR as other suitors
@seawolfresearch
Matt, I’ve got to say, your work on coal is top-notch. I’m new to the scene, but after stumbling upon your posts with Pabrai, I found myself diving headfirst down the coal rabbit hole.
I’m on board with the growth thesis for HCC, and I see the big picture with AMR, but I’m scratching my head over what makes ARCH stand out. It’s in both Pabrai’s and Guy Spier’s portfolios, and it’s got me wondering—what’s the secret sauce that you all see in ARCH?
When not fighting geology at Leer or logistical outages beyond their control, they are the lowest cost provider to the market of high quality HVA metallurgical coal, once the domestic contracts roll off at West Elk then they’re exporting another 1-2 Mst of NEWC spec coal off the West Coast, and the PRB - while I do have concerns - is also a call option on increasing domestic baseload power demand.
Same question here
Matt - Would you maybe be up for writing a piece on thermal coal - some time after you get back from vacation? I could be wrong, but is the market sleeping on thermal coal as met coal seems to be getting a lot of attention from folks on X, etc.?
Great update thanks Matt. Hope you had a great dinner with Monish!
Hahaaa was fantastic…what a smart, wonderful person he is!
Thanks Matt for the update. Not sure if there has been a recent update but I recall that Grosvenor closure should start impacting sales in calendar Q4 (with inventory covering sales in Q3). When you return, can you provide an update on the status of the Longview Mine?
Yes Grosvenor tons are stockpiled for delivery through Sept. Longview remains down indefinitely...have heard there was damage to the longwall so it's a year or two at least, depending on how much it is to repair and if they have access to enough capital to get it done.
I have seen capacity numbers for Longview listed as 3.3M tons of high vol A met coal. Add that to the Grosvenor total of at 3.5M+ tons, that seems like a pretty serious hit to supply to offset weakness in demand.
Thanks for the update on met. I know you are on vacation.
Appreciate the update, especially since you're on vacation!
Thx for the update.
Which American producers are most exposed to China?
It's spread out proportionally to production...but the US only exports about half a million tons per month of coking coal to China, and a lot of that comes from traders.