Q4 2022 Highlights & Recent MSHA Data
Along w/ a markets and technical analysis review of each US coal producer
Herewith a summary of Q4 2022’s financial results along with an MSHA production update for Q1 2023 and guidance summary for the year. In this article we will at first review the met markets and production data, then analyze each the following US met producers:
Alpha Met Resources
Arch Resources
Warrior Met Coal
Coronado Global Resources
Ramaco Resources
Then we review each thermal coal basin in the US along with the predominately thermal coal producers:
CONSOL Energy
Alliance Resource Partners
Peabody Energy
Metallurgical Coal
Metallurgical coal producers continued to face high cash costs throughout 2022, with expenses exceeding $100 per ton in every quarter. Although robust sales prices buoyed their bottom line in the first six months, the subsequent drop in prices eroded cash margins. As a result, producers' profitability suffered despite strong sales volumes for the year.
Total met tons produced in Q4 2022 were 16.9 million in the US. The avg. sales price was $190/ton with cash costs of $110/ton; operating margins were therefore $80/ton. CAPEX for reporting companies was approximately $24/ton.
This compared to Q3 2022, where 16.8 million tons were produced, with an avg. sales price of $191/ton and cash costs of $107/ton; operating margins were $84 with $16.73/ton of CAPEX.
Peak margins so far this cycle were back in Q2 2022, which saw an avg. sales price of $247 and operating margins of $183/ton.
MSHA data for Q1 2023 for US met is below:
Note: all bulleted volumes are x1,000 short tons, elsewhere mostly in tonnes unless specified.
Total USA Met +11.9% quarter-over-quarter (QoQ) at 18,991 tons
Investments in metallurgical production by companies such as Alpha, Arch, Ramaco, and a few private companies are starting to take shape, with these reporting producers reaching four-year highs in production. Expansion projects by Allegheny Met, CONSOL, and Corsa are also evident, with production expected to continue to grow as long term prices remain attractive, at least according to the forward curve. The end of the UMWA strike at Warrior in March is also expected to eventually lead to an increase in production guidance for the company, not to mention the Blue Creek development expected in a few years.
There has been a noticeable decline in the past month despite prices remaining supportive. Australian PLV prices, which briefly reached $400/mt in mid-February have dropped nearly to $250/mt last week. US met coal prices have also receded and this downward trend will probably persist as the seasonally strong period ends and we enter the seasonally weak summer period.
As you can see in the chart above, as spot prices recently pulled back sharply, forward prices have held up moderately well. This is suggestive of sustainable demand as well as inflationary cost pressures being felt throughout the industry.
The Chinese reopening, which was once promising material increases in demand, has disappointed somewhat due to weak real estate and construction activity. Automobile demand is also beginning to show stress due to high-interest rates and inflationary effects on automobile prices. Overall, with increasing supply from Russia, Mongolia, USA, and perhaps even Australia as dryer conditions take hold, demand remains relatively weak.