PLV met coal markets couldn’t sustain momentum from last week, and paper prices resumed their prior march toward $190/tonne. Physical assessments remain a few dollars higher (~$195/t), but with no index-eligible trades, properly calibrating the market is impossible here, and these levels represent little more than a best guess. US met prices, however, continue to hold their ground, with relativities now approaching parity with their Australian counterparts (chart below). This is in line with expectations as US costs are higher on average, and I’d venture to guess zero spot activity will be the norm going forward at these levels.
At $200 PLV equivalent, roughly 7% of global production is underwater (all in US), and at $175 that figure is closer to 25%, with higher cost Australian production then coming into play. So while short term numbers can certainly still head lower as China weakness persists, we’re approaching the line in the sand where we will start to see production cutbacks unless end users step back in.
Hey Matt, Just wondering, what are your opinions on the long term met coal market, especially concerning AMR and HCC? (I am talking about 5 years and more)
Hi matt ! Thanks for the update. I added to CEIX today, but for the time being I'm not adding any more HCC. Is my back of the napkin math roughly correct on the CEIX/ARCH merger with 5bio market cap and 1bio free cash flow for 2024 ? Thanks
I have more work to do to get to a number there. My worry with CEIX short term isn’t their performance, it’s the lack of buyback and the paper hands nature of small TAM funds heading into thermal coal shoulder season (even though that doesn’t matter much for them).
thanks for update, Matt. Generally and based in your experience, how "reactive" are miners or how reactive do you anticipate them to be this time around in terms of production cutbacks, do they need to be a few weeks underwater or is it more like a few months or a few quarters? I guess it all depends on the fixed and variable cost structures of each miner as well as the stop and restart cost but I have no idea if we are talking in terms of weeks or quarters. Any insight much appreciated
Yes dependent on cost structure and probably a few quarters at these levels which are quite navigable short term. If China continues to produce at this pace beyond that, however, tons will dry up…the U.S. is already mostly out of the money on a CFR China basis.
Hi Han - at this point it’s much less about stock price and more about Met coal market improvement, which requires an improvement in China steel demand.
I have small limit orders set in increments down to $200 and I’m perfectly fine buying a few shares whenever I add $ to the 401k, but there remains no rush to size up or YOLO the sector just yet.
The share price itself is exciting to me, but the met market is just not at this time, and rate of change in met price precedes rate of change in stonks. I do think Met prices will see a stabilization over next month and potentially turn up in Oct/Nov, but upside is limited until there’s a supply outage, India rescues the market, or China steel gets off the Schneid.
Thank you very much Matt for the great insight on the Met coal market. Could you please mention some Met Coal company that has the lowest cost quartile. Thank You.
Hey Matt, Just wondering, what are your opinions on the long term met coal market, especially concerning AMR and HCC? (I am talking about 5 years and more)
Nothing has changed with regard to underlying long term thesis, despite what bears who haven’t done even a modicum of long term work are saying.
Thanks!
Hi matt ! Thanks for the update. I added to CEIX today, but for the time being I'm not adding any more HCC. Is my back of the napkin math roughly correct on the CEIX/ARCH merger with 5bio market cap and 1bio free cash flow for 2024 ? Thanks
I have more work to do to get to a number there. My worry with CEIX short term isn’t their performance, it’s the lack of buyback and the paper hands nature of small TAM funds heading into thermal coal shoulder season (even though that doesn’t matter much for them).
thanks for update, Matt. Generally and based in your experience, how "reactive" are miners or how reactive do you anticipate them to be this time around in terms of production cutbacks, do they need to be a few weeks underwater or is it more like a few months or a few quarters? I guess it all depends on the fixed and variable cost structures of each miner as well as the stop and restart cost but I have no idea if we are talking in terms of weeks or quarters. Any insight much appreciated
Yes dependent on cost structure and probably a few quarters at these levels which are quite navigable short term. If China continues to produce at this pace beyond that, however, tons will dry up…the U.S. is already mostly out of the money on a CFR China basis.
thanks Matt
Nobody public
Which U.S. companies represent the 7% underwater at $200 PLV?
Nobody public
Hi Matt, Thanks for the update. At what stock price will you start accumulating AMR and HCC? Thank You.
Hi Han - at this point it’s much less about stock price and more about Met coal market improvement, which requires an improvement in China steel demand.
I have small limit orders set in increments down to $200 and I’m perfectly fine buying a few shares whenever I add $ to the 401k, but there remains no rush to size up or YOLO the sector just yet.
The share price itself is exciting to me, but the met market is just not at this time, and rate of change in met price precedes rate of change in stonks. I do think Met prices will see a stabilization over next month and potentially turn up in Oct/Nov, but upside is limited until there’s a supply outage, India rescues the market, or China steel gets off the Schneid.
Thank you very much Matt for the great insight on the Met coal market. Could you please mention some Met Coal company that has the lowest cost quartile. Thank You.