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US coal exports surge 26% YOY in Q2, led by growth in India

Q2: U.S. Solar and Wind Power by the Numbers

Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

Rate case activity slips, COVID-19 proceedings remain at the forefront in August


US coal exports surge 26% YOY in Q2, led by growth in India

The U.S. saw a 25.8% growth in coal exports during the second quarter compared to the year-ago period, shipping about 7.8 million more tons overseas.

Portugal and Egypt had the largest year-over-year increases during the quarter, up by 286.1% and 265.2%, respectively, according to data compiled by S&P Global Market Intelligence.

India was the largest importer, buying 2 million tons more than Japan, the second-largest importer of U.S. coal during the quarter. India bought 5.1 million tons of U.S. coal, a 24.5% year-over-year increase and a 600,000-ton decrease from the first quarter of 2018. Japan's U.S. coal imports held steady, decreasing slightly from the first quarter and increasing by less than 1% over the second quarter of 2017.

The Netherlands rounded out the top three, buying 2.8 million tons of coal during the quarter, a 72.4% year-over-year increase. During the year-ago period, the Netherlands was the eighth-largest importer of U.S. coal.

Only four of the top importers purchased fewer tons in the most recent period than a year ago: France, Guatemala, South Korea and Spain. Guatemala had the largest percent decrease, reducing imports by 62.7% from the year-ago period to 106,000 tons.

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Ben Nelson, Moody's senior credit officer and lead analyst for its coal portfolio, said in an Aug. 31 interview with S&P Global Market Intelligence that domestic coal producers' cash flow generation has improved over the last several quarters and "the export market is a big factor in that."

While he thinks that will continue, he cautioned that seaborne coal pricing is volatile "and a significant pullback could challenge the economics for many exporters out of the U.S." Producers with lower-quality metallurgical coal may be more challenged by market changes than companies that mine higher-quality coal, he said.

Arch Coal Inc. President and COO Paul Lang said on a July 31 earnings call that the company has "clearly done well in Asia" and has its longest-term metallurgical coal contract with an Asian steel producer.

Deck Slone, Arch's senior vice president of strategy and public policy, said on the call that India is importing more than 50 million tons of coking coal, rivaling China's imports.

"Certainly, in the next few years, we can see India surpass China," Slone said. "But we believe China is going to continue to avail themselves of the seaborne market."

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The U.S. exported 2.1 million tons of coal to China in the second quarter, up from 1.7 million tons in the year-ago period, making it the ninth-largest importer.

Alliance Resource Partners LP's CEO and President Joseph Craft said in a July 30 company release that exports increased from about 4.5% of the company's total sales volumes in 2016 to 27.2% of anticipated sales at the midpoint of the 2018 guidance.

"Through the first six months of the year, [Alliance] has booked 10.4 million and 3.1 million tons for delivery in 2018 and 2019, respectively, into the growing international thermal coal market," he said. "The metallurgical export markets also remain attractive and we now plan to export approximately 725,000 tons of metallurgical coal in 2018."

Cloud Peak Energy Inc. President and CEO Colin Marshall said during a July 26 earnings call that the company's customers are expected to be in South Korea, Japan and Vietnam. Increased demand in India could draw more attention from Indonesian coal producers, opening export opportunities to Japan and South Korea, he said.

"As long as we can put it on a ship at a reasonable price, then ... it should go to the nearest customers," he said. "But the important thing is the demand overall is growing."

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