Coal Age

JAN-FEB 2019

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January/February 2019 www.coalage.com 23 forecast survey 2019 continued Evolving World Markets The importance of the Asia/Pacific re- gion was highlighted in the lead item for the news section this month (see the IEA Forecast, p. 4). Despite import re- strictions enacted by the government, China imported an additional 16 million mt of thermal coal in 2018. The coun- try produces more than three times the amount of coal as the U.S., but domes- tic supply was outpaced by increased power consumption, which grew at the highest rate since 2011. Indian ther- mal coal imports increased 18% to 167 million mt as its growing coal produc- tion could not keep pace with domestic demand. In addition, ASEAN nations expanded imports by 19 million mt in 2018 to support ongoing urbanization. Globally, coal-fired power plants con- tinue to be built, with approximately 56 gigawatts of new capacity added in 2018, with another some 60 gigawatts of additional capacity expected to come online in 2019. On the supply side, lower-quality Indonesian exports rose 39 million mt in 2018 over the prior-year, primarily in response to increased demand from China and India. Both Australian and U.S. thermal coal exports remained strong, up 4% and an estimated 34%, respectively, year-over-year. Outlook From Other Majors Within the U.S., a mix of higher seasonal demand, increased fourth quarter nat- ural gas prices and ongoing strength in exports resulted in continued stockpile reductions despite substantial plant re- tirements in 2018. As a result of continued strength in seaborne thermal coal pricing, the Illinois Basin is forecast to be the largest thermal exporting region in the United States. Getting back to the difference be- tween the western and eastern U.S. coal operators, Peabody expects to reduce production and sales of higher-qual- ity and higher-cost coal from its North Antelope Rochelle mine by 10 million tons. With the announced closure of the Navajo Generating Station (NGS) by year-end 2019, the company also said that the Kayenta mine's production and sales are expected to cease in the third quarter given plant inventory levels. That would be an additional 2 million tons. Factor in the problems occurring at Cloud Peak Energy and Westmoreland Coal, it's plain to see that western U.S. coal production easily drop 20 million tons or more in 2019. CONSOL Energy's 2018 sales vol- ume totaled 27.7 million tons, which exceeded the high-end of its guidance and represented record annual sales. This growth was achieved due to im- proved demand for its products, as well as the company's ability to ramp up production and capture that demand improvement. "We believe that inventories at sev- eral of our key customers' Northern Ap- palachian rail-served power plants are below normal, and absent any meaning- ful weather-related demand decline, we expect to ship all we can produce during 2019 as our customers will continue to seek additional coal to replenish their depleted stockpiles," said Jimmy Brock, CEO, CONSOL Energy. The company's guidance for 2019 is 26.8-27.8 million tons, which is close to the previously stated record production level. U.S. coal operators should be able to maintain the new 750-million-ton norm, but the makeup of the mix will likely shift from West to East. Utility buyers will likely replenish stockpiles. They will be competing with consum- ers abroad for high-Btu coal from mines with access to the inland waterways. Global markets will continue to affect the U.S. coal business either directly or indirectly by removing tons from the do- mestic market. Should the trade tensions between the U.S. and China ease, energy generation and steel production could grow considerably. A significant decrease in natural gas prices and a prolonged trade dispute could, however, also have a negative im- pact on the market. Natural gas is a by- product and, when petroleum prices are high, excess gas enters the market. For the moment, at the beginning of 2019, the market forces in general are work- ing in favor of the eastern U.S. coal op- erators. On a tonnage basis, that means more mines and jobs to produce the same amount of coal. Figure 7 — Survey Demographics

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