December 5, 2018 Read More →

Analyst sees ‘storm clouds’ looming for U.S. coal exports

S&P Global Market Intelligence ($):

Analysts at the American Coal Council’s 17th annual Coal Trading Conference cautioned that the recent strong seaborne market for U.S. thermal and metallurgical coal could soon face pressure from slowing global economic growth and escalating trade tension.

Charles Dayton, vice president for market analytics for Doyle Trading Consultants, said he expects U.S. coal exports to peak this year at about 120 million tons.

While U.S. producers may face fewer regulatory and capacity challenges at home, revised economic forecasts from the International Monetary Fund point to slowdowns in vital thermal markets such as India and Turkey, Dayton said in his presentation Dec. 4. He said he also sees “storm clouds” for U.S. producers in recent economic activity in Germany and Japan.

The threat of escalating trade tensions could add further strain to U.S. suppliers with an eye on the international market, said Lucas Pipes, senior vice president and senior analyst for B. Riley FBR. Pipes said the perception that the standoff with China had evolved from an opportunity to a market risk was worrisome for U.S. coal and metals producers, who could face “tit-for-tat retaliatory tariffs and duties” and other unintended consequences if current talks fail to address the concerns of both sides.

In the case of a broader global economic slowdown, domestic metallurgical producers would be significantly exposed to a decline in demand as nearly 75% of their product went to the export market in 2017, Pipes said. Further, continued steel tariffs on U.S. imports could add to production costs for underground miners. According to Pipes, steel structures account for about 10% to 15% of their costs.

More ($): ‘Storm clouds’ are on horizon for U.S. coal exports, analysts warn

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