November 8, 2018 Read More →

Cautious investors keep lid on U.S. metallurgical coal expansion

S&P Global Market Intelligence ($):

U.S. metallurgical coal producers have enjoyed supportive international pricing trends since fall 2016 but continue to report logistical and capital constraints keeping a lid on further growth.

The industry has had two years to get comfortable with improved metallurgical coal pricing after a years-long downturn in prices for the commodity played a big role in pushing major coal names such as Peabody Energy Corp. and Arch Coal Inc. into bankruptcy. While metallurgical coal producers eye potential for growth in places such as China and India, U.S. producers have brought on little new capacity, even as an already-constrained supply situation continues to tighten, in part thanks to limited access to capital and difficulties securing transportation.

“The key thing is confidence,” Ian Cameron, senior director in iron and steel with consultant Hatch Ltd., said during a Nov. 7 panel discussion on opportunities and threats in the coke and coal sector at the 2018 MetCoke World Summit in Pittsburgh. “Is this something that can sustain itself long enough to pay for major, major investments, not only in mines but in cokemaking facilities?”

The ownership of several U.S. coal companies that produce metallurgical coal changed drastically in the wave of bankruptcies that swept the sector. New investors want to see a return on their capital much more than they want to see production totals rise, said Mike Nobis, director of coal trading at DTE Energy Services Inc.

More ($): Despite price improvement, lack of confidence stymies U.S. met coal investment

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