Seaport Global Securities LLC reported after discussions with S&P Global Platts editors that analysts are expecting more clarity on the future of metallurgical coal benchmark pricing "in the next few days."
According to a research note June 9, there is a "schism" between parties that want to keep the current quarterly pricing benchmark mechanism for international sales of met coal and those that believe there has been too much volatility in the market to not switch to a system of price indexation. The note says the second-quarter benchmark will likely be an average of the March, April and May prices, equating to a price around the low end of the $190s per tonne, Seaport wrote.
"That's a lot higher than the current spot price of $148.50/tonne, which could cause some market dislocation once the quarterly price settles," the note states.
Seaport also noted the Platts editors are seeing an oversupply situation developing in the high-vol B market for met coals as higher-grade thermal coals have begun to cross over into the met coal market.
Seaport also shared notes from a recent management presentation and mine tour at met coal producer Ramaco Resources Inc.'s Elk Creek complex. The analysts called the operation a "'show me' story" with the question remaining whether management can execute plans for the operation.
"On the permitting front, the company is still awaiting final approval of its low-vol Berwind mine," Seaport reported. "The delay is largely linked to two local crayfish being put on an 'endangered' list. The company is confident it will receive the permit, hopefully by the latter part of July."
Seaport said coal deliveries from the operation are expected by the third quarter and noted Ramaco, which recently debuted an initial public offering, is among producers reporting no trouble finding labor.
BMO Capital Markets Corp. also recently filed a report from visiting the mine, noting "no changes to the key operating targets" overall as result of the visit. Despite much progress at the mine and other positive indications, the BMO note warned of weakness in Ramaco shares since "the IPO is overdone."
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