Ramaco Resources Inc. is switching up its metallurgical coal quality mix, in part to move away from what it expects to be a crowded market.
Metallurgical coal, which is used to produce coke for making steel, is classified into low-vol, mid-vol and high-vol categories based on carbon and volatile matter content, with the high-vol category content further divided by heat content such as high-vol A or high-vol B.
Kentucky-based Ramaco plans to increase its focus on low-vol and mid-vol coal offerings, Randall Atkins, founder, chairman and CEO of Ramaco, said on a March 8 earnings call.
"In part, that decision is based on our organic reserve quality mix, but it's also based on what we perceive may be some future crowding in the high-vol A space," Atkins said.
The company expects to grow its overall coal production by 30% in 2024 compared to 2023, according to the investor presentation from its earnings call. While Ramaco expects low-vol met coal production to remain "essentially flat," Atkins noted that several companies want to bring new high-vol A production online over the next two years.
Arch Resources Inc., for example, has been ramping up its Leer South mine in West Virginia, which is expected to increase its high-vol A coal output to around 8 million short tons per year. Warrior Met Coal Inc. in Alabama spent $319.1 million in 2023 to start mining "one of the last remaining untapped premium quality high-vol A coal reserves in the US."
While Atkins pointed to reserve depletion among existing low-vol mines, new production is also coming online in that category. Pennsylvania-based coal producer Consol Energy Inc. recently restarted the development of its Itmann mine, which is expected to produce a low-vol metallurgical coal product out of West Virginia.
Atkins said Ramaco is hoping to capture the margin as spreads widen between premium low-vol and lower-tier high-vol coals. He also said the company is advancing with its metallurgical coal sales into Asia.
"We are now a major supplier to Indonesia and other non-China markets," Atkins said. "Despite the gloom around China, we see the other Asian markets are relatively healthy. We look forward to making further inroads in the region, particularly with our ability to leverage our increasing low-vol production slate."
The Platts US East Coast Low Vol Hard Coking Coal price was last assessed at $257 per metric ton on March 8. The US East Coast High Vol A Coking Coal price was $249 per metric ton.
Ramaco reported net income of $82.3 million for 2023, decreasing from $116.0 million in 2022, while revenue increased to $693.5 million from $565.7 million.
The Platts-assessed US East Coast Low Vol Hard Coking Coal and US East Coast High Vol A Coking Coal prices are offerings of S&P Global Commodity Insights.
