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March 2018 www.coalage.com 7 news continued Until the past few years, Alliance sold most of its coal domes- tically. But that is changing as the company has been successful in making inroads overseas, particularly in Europe. "We do continue to see strong opportunities in the export business," Craft said. "And, in large part, we sell quite a bit of our Gibson product in the export market that has a lower-sulfur prod- uct and is being received very well in the export markets. That's one reason we are bringing our Gibson North property back into the marketplace. So, we would expect to see more volumes in the export market in 2018." Alliance already has secured 2018 delivery commitments for 5.7 million tons to the steam coal export market and 150,000 tons to the international metallurgical coal market, and the company expects opportunities to sell into both of these markets in 2018 and beyond. In 2017, the company significantly expanded its presence in export markets, boosting year-over-year shipments to those mar- kets by 4.7 million tons up to 6.3 million tons, or approximately 16.7% of its total 2017 coal volumes. It is possible, Craft said, that exports could grow to as much as nearly 25% of the company's total sales. In response to a question about longer-term export sales agreements, Craft preferred to use the term "longer-term rela- tionships," adding the contracts "would always be priced annual- ly, if not quarterly, but we would expect to try to grow our percent, we would want that to be sustainable." Asked about potential mergers and/or acquisitions, Craft said the focus would be on assets in the Illinois Basin, Northern Ap- palachia or possibly Central Appalachia. And while Alliance has "done some evaluation in the metallurgical market," he does not anticipate any transactions occurring in 2018. While Alliance is benefiting from international markets, "our core strategy will remain to be on the domestic utility industry," he said. "We also are looking at investments outside of coal that would be consistent with the type of investments we have made." Craft stressed that too much emphasis should not be placed by analysts on Alliance's mergers and acquisitions possibilities. "The message is we are open to participating in consolidation," he said. And while Alliance did consider unspecified coal industry deals that took place in 2017, "we weren't successful in buying those, but that doesn't mean that we don't have an appetite" for them. FirstEnergy to Sell or Close Pleasants Coal Plant in West Virginia FirstEnergy Corp., responding to unfavorable regulatory rulings, said in late February it will sell or close its 1,300-megawatt Pleas- ants coal-burning power plant along the Ohio River in Willow Is- land, West Virginia, by January 1, 2019. Transferring ownership of the nearly 40-year-old power plant from its unregulated Allegheny Energy Supply subsidiary to its regulated Monongahela Power and Potomac Edison affiliates was part of FirstEnergy's strategy to exit the merchant generation business later this year. Arguing they needed the generation to avoid a potential en- ergy shortfall, Mon Power and Potomac asked the West Virginia Public Service Commission on March 7 to approve their acquisi- tion of Pleasants for $195 million. The move would have ensured Mon Power and Potomac a profit from running the plant. A peti- Universal said it intends to convert the North Block Complex to a multiproduct operation with the gradual inclusion of the adjacent Paardeplaats project. The North Block Complex currently employs more than 180 staff and 1,100 contractors. Universal Chief Executive Officer Tony Weber said, "This stra- tegic acquisition significantly increases Universal's already robust production profile and importantly, it provides the business with considerable optionality and diversification through exposure to additional high margin export markets." China Caps Thermal Coal Prices China's Qinhuangdao port started to cap thermal coal prices for FOB 5,500 kcal/kg coal at RMB750 per metric ton (mt) ($118.28/ mt), following a request from China's National Development and Reform Commission (NDRC). Colder-than-normal weather in Jan- uary resulted in strong thermal coal demand and a subsequent increase in prices. Spot thermal coal prices for FOB Qinhuangdao 5,500 kcal/kg reportedly reached RMB780/mt ($123/mt) recently. These high prices and the potential for them to rise even fur- ther is likely what prompted NDRC to intervene. "The price cap will have an impact from now until mid-March," said Zhai Yu, northeast Asia senior consultant, Wood Mackenzie. "Demand for thermal coal will fall in February during the Chinese New Year holiday. But supply will also fall for the same reason. After the holiday period, demand will quickly return and restock- ing by gencos will add additional demand. Without the price cap, we do not expect prices for FOB QHD 5,500 to drop below RMB750 per ton until the middle of March, when the need for heating coal disappears." The price cap will be difficult to implement, Yu said. The mea- sure impacts thermal coal prices, Yu explained, but it is only the power industry that has called for coal prices to be restricted. "As electricity tariffs are fixed, high coal prices resulted in big losses for the gencos in 2017," Yu said. "Non-power industries aren't so bothered by coal price fluctuations as their product prices are mar- ket-driven and can adapt accordingly." The NDRC has asked railway operators to prioritize transport- ing coal for power use in the winter. Stability of supply is more important than price to non-power industries. So even if the NDRC caps coal prices, non-power coal users will be prepared to pay more to miners or traders to receive their supply, Yu said. China's coal market has increasingly become policy-driven over the past few years, Yu explained. Supply-side reform, strin- gent environmental restrictions on production, transportation and consumption of coal, and frequent government intervention in price-setting are puzzling market participants and investors alike. This may be a key reason why the price management scheme introduced last year has not been very successful and supply re- covery remains muted. Yu said only time will tell how successful raising the scheme's upper boundary of RMB600 per ton by 25% will be in controlling volatility and stabilizing the market. Mean- while, seaborne suppliers will continue to benefit from China-driv- en high prices. India Plans Further Coal Sector Reforms Bringing the curtains down on the nationalized coal industry since 1973, the Indian government is working to further deepen reforms of the sector, thereby blurring the lines between commercial and captive mining. Continued from p. 6... Continued on p. 9...