While coal exports out of the Port of New Orleans surged in 2018, international shipments were hampered during the first quarter of 2019 due to Midwestern flooding that caused high water levels on the Mississippi River and prevented some barges from carrying coal south.

The port shipped 3.5 million tonnes of coal during the period, 13.1% less year over year and 29.2% less than in the fourth quarter of 2018, according to data compiled by S&P Global Market Intelligence. Foresight Energy LP reported that the high and swift water likely prevented it from exporting about 1 million tons of coal during the period.

"Based on the most recent river conditions forecast, we expect vessel loading will persist through the second quarter," said Foresight President and CEO Robert Moore.

Overall coal exports declined by 7.7% year over year in the first quarter, when the API2 benchmark, which tracks the price on thermal coal being sold into Europe, also dropped significantly. Doyle Trading Consultants CEO Hans Daniels said in a May 23 webcast hosted by the American Coal Council that global thermal coal demand is very strong given the 111 GW of new coal capacity currently under construction around the world and another 300 GW of projects, which is more than the entire U.S. fleet, that are planned though not under construction.

"There will be growth globally, but it's going to occur in pockets," Daniels said. "A large part of Europe is also shrinking in their coal demand, but when you get to Eastern Europe, when you get to Asia, when you get to the developing world, coal will still very much be in demand."

The Port of Baltimore, which exports thermal and coking coal, shipped 5.9 million tonnes of coal during the period and saw the highest percentage increase year over year among the largest terminals, with a 16.4% uptick in export tonnage. Consol Energy Inc. President and CEO James Brock said its Baltimore terminal had "strong operational quarters" and its 4 million tons of first-quarter throughput volumes, when annualized, "put us on track for a record volume year as well." The company delivered more than 2 million tons of thermal coal to 13 countries, including 1.1 million tons to India and about 500,000 tons to Europe.

Gregory Marmon, a Wood Mackenzie senior research analyst, said his company projects the API2 index will average $60/t in the second quarter, $65/t in the third and $69/t in the fourth, which may limit many U.S. producers' ability to compete in the market. Marmon expects the market to decline further into 2020 as contracts roll off as well. While the Powder River Basin is expected to break even the next few months, Central Appalachia, Northern Appalachia and Illinois Basin producers could take a hit if prices remain low, he said.

B. Riley FBR analyst Lucas Pipes said competition with lower gas prices in Europe as well as supply growth in Russia and Indonesia may have contributed to lower thermal prices. The prices may correct themselves if production came out of the market, he said, but with contracts in place, there has not been a significant supply response.

The seaborne market would need to decline more significantly before U.S. producers would really suffer, said Benjamin Nelson, senior credit officer and lead coal analyst at Moody's. A major drop in thermal pricing could lead to more tons showing up in the domestic market and depressing prices in the U.S., something that could start to happen if API2 prices remain low and contracts start coming off the books.

"Most of the industry has good balance sheets relative to their ratings with cushion in their metrics," Nelson said, "so it would not be a concern right now."

Nelson said coking coal pricing has held up and the outlook for the steel industry is stable, which could be supportive of metallurgical pricing.

"Met prices are currently above the range we use for forecasting and rating purposes," he said, "so we don't see a catalyst to drive that down right now."

Wood Mackenzie expects coking coal prices to remain above $180/t through the end of the year, Marmon said. Though he projects a 5-million-ton decrease in coking coal exports this year from 2018, the year should still be positive for the industry overall.

Metallurgical coal producers have announced several capacity projects over the last few months, suggesting that investors are more confident in pricing, Pipes said. There has been a "notable shift" in the last year, he said, "but there's no blank check here to grow capacity by any stretch of the imagination."

"In the scheme of things, the announcements that we've seen thus far are still relatively modest and the scrutiny of investors of those growth projects is still extremely high," Pipes said. "If folks really had very high conviction levels, you would see more growth projects."