Coal news and updates

Natural Resource Partners projects Illinois Basin coal demand to rise 42% by 2020, driven by the basin's low production costs -- which feed into lower prices for buyers -- and continued demand for thermal coal, a company executive said Tuesday.

 

Wyatt Hogan, the Houston-based company's executive vice president, speaking via webcast from the Global Hunter Securities GHS 100 conference in Chicago, said demand from both US utilities and overseas buyers would push production in the basin to 200 million st by 2024, which would mark a 51% increase from 2013, when roughly 132 million st were produced.

 

At the same time, the company projects Central Appalachian thermal production to drop from 272 million st in 2013 to 194 million st by 2024, a 29% decrease.

 

"Just reading the paper and looking at the news, you'd think the coal industry is coming to an end next week, but in the Illinois Basin demand is expected to grow," said Hogan. "We'll see a decline in Central Appalachia, which is a high-cost basin and that is one that is really going to get hit by regulations the hardest and continues to struggle."

 

NRP owns 2.3 billion st of coal reserves in the US, which include holdings in the Illinois Basin.

 

Foresight Energy, a basin producer which launched an initial public offering last week, operates three of its four mines in Illinois on reserves leased from NRP.

 

Hogan said coal production from NRP's Illinois Basin coal reserves made up 5% of the company's production in 2005, but the share had risen to 25% in the first quarter of 2014. Production is expected to continue to grow.

 

He added that 40% of NRP's coal revenues came from the Illinois Basin in Q1.

 

"When we think about the existing assets we have, there is a lot of upside from where we stand today," said Hogan. "Coal has been on a down cycle for the last two and half to three years but the thermal market is starting to come back a little."

 

Hogan said that an increase in coal prices is likely to happen soon, given low coal and natural gas inventories at US utilities, though a lot would depend on the weather.

 

"I think if we do have a hot summer, you are positioned to have a thermal price recovery this year," Hogan said. "If not, and if [inventory] levels are going to remain low, then a cold winter could have the same impact, so for the first time in a few years I think there is a general sentiment the steam market is feeling a lot better and we're just waiting to see the impact on prices."

 

The Platts weekly assessment for 11,000 Btu/lb, 5lbs SO2/MMBtu barge-delivered coal from the basin was $41.65/st last week, up nearly 5% from the start of the year.

 

 

Source: Platts