Released November 27, 2017 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--Following years of eroding demand, declining prices and a harrowing string of bankruptcies, U.S. coal miners are demonstrating they once again can be profitable. Industrial Info is tracking more than $3 billion in active coal mining-related projects, including $1.4 billion in various stages of construction in the U.S.
Five of the country's largest coal producers--Alliance Resource Partners L.P. (NASDAQ:ARLP) (Tulsa, Oklahoma), Arch Coal Incorporated (NYSE:ARCH) (St. Louis, Missouri), Cloud Peak Energy Incorporated (NYSE:CLD) (Gillette, Wyoming), Peabody Energy Corporation (NYSE:BTU) (St. Louis, Missouri) and Warrior Met Coal Incorporated (NYSE:HCC) (Brookwood, Alabama)--reported a collective $801 million in third-quarter earnings before interest, taxes, depreciation and amortization. That represents more than a 76% increase from third-quarter 2016 earnings of $454 million, and Peabody Energy's highest profit since 2012.
It's a sharp reversal from a few years ago, when low coal prices and excessive debt drove many of America's largest miners into bankruptcy. With many producers now emerging with stronger balance sheets, the coal industry is benefitting from a period of higher seaborne prices for thermal coal, which is used for power and heat generation, and metallurgical (met) coal--used to produce coke--the primary source of carbon used in steel-making.
Click on the image at right for an EIA graph showing U.S. coal production by region.
The elevated prices can be attributed, in part, to soaring Chinese imports. Exports helped support pricing and sales volumes in the third quarter for Alliance Resource Partners, with increased domestic and overseas demand likely to lead to strong sales in the next several quarters, company executive said last month. Industrial Info is tracking $175 million in active Alliance projects and is monitoring 10 plants in the U.S.
Click on the image at right for an EIA graph showing China coal consumption.
"Exports have played a major role in supporting U.S. coal prices in 2017, and it appears domestic markets have bottomed-off very low levels," Alliance Chief Executive Joe Craft said in an earnings-related call.
Alliance expects to see higher sales to domestic utilities because of a number of legacy contracts with higher-cost mines that are set to expire. However, the producer said it also encountered "adverse geological conditions" at its Hamilton mine in Dahlgren, Illinois, during the third quarter, which caused results to come in below expectations. However, the company partially made up for that issue by selling coal from its inventory, and the mine is now back up to its planned production levels. For that reason, Alliance still expects to meet its full-year guidance.
Fewer than six months after emerging from Chapter 11 bankruptcy protection, Peabody Energy reported a profit of $203 million on revenues of $1.48 billion for the third quarter of 2017. Industrial Info is tracking just over $677 million in active Peabody projects in Australia. Industrial Info's database also includes 25 Peabody plants in the U.S.
"We view this as a striking quarter for the Peabody team," Glenn Kellow, president and chief executive officer, said in an earnings call. "We've made progress across the board."
Powder River Basin (PRB) coal continues to be Peabody's most lucrative operations, with its mines bringing in about $421 million in revenue in the third quarter. The company's Australia metallurgical mines nearly matched that, however, at around $416 million.
Peabody's PRB assets include the Caballo, North Antelope Rochelle and Rawhide mines, where year-over-year production remained rather flat. Collectively, the mines produced 33.7 million tons in this year's third quarter, compared with 33 million tons in 2016. Year-to-date production is up significantly to 93 million tons, versus 80 million tons for the first three quarters of 2016. For more information, see October 26, 2017, article - Coal Giant Peabody Tries to Take Luminant Power Plant Closure in Stride.
Cloud Peak's PRB mines in Montana and Wyoming continue to ramp up coal exports, with another 1.3 million tons sent overseas in the just-ended third quarter, the company reported. Industrial Info is tracking $400 million in active projects involving Cloud Peak. Industrial Info's database includes three Cloud Peak plants.
Cloud Peak's exports resulted in an improved net income of $2.6 million for the quarter, compared with a $1.6 million loss in the prior-year quarter. While still showing a loss for the year, Cloud Peak ended the quarter with about $523 million in liquidity.
Another metallurgical coal producer, Warrior Met Coal Incorporated (NYSE:HCC) (Brookwood, Alabama), reported third-quarter 2017 net income of $119.7 million, compared with a net loss of $33.6 million in the prior-year quarter, on revenues of $107.3 million, versus revenue of $5.8 million in the prior-year period. Warrior executives said the market for high-quality, premium met coal remains volatile, "reflecting stronger Chinese demand and ongoing disruptions to supply from U.S. and Australian miners." Industrial Info is tracking $12 million in active Warrior projects in the U.S.
"Strong sales volumes, coupled with high-price realization and an exceptionally low-cost structure enabled us to achieve strong free cash flow conversion," Warrior Met Coal Chief Executive Officer Walt Scheller said in an earnings call.
Warrior continued to make progress in the ramp-up of mining operations toward its historical annual production level of around 8 million tons. The company produced 1.6 million tons of met coal in the third quarter, nearly three times the amount produced in the prior-year period. For more information, see Industrial Info's October 18, 2017, article - U.S. Coal Production Expected to Rise 8% in 2017.
"We are undertaking the moves necessary to increase our production levels in a responsible manner, and that work will continue in the months ahead as we move closer to achieving the nameplate-production capacity in our two mines," Scheller said.
Coal is currently mined in more than 50% of U.S. states, data from the U.S. Energy Information Administration (EIA) shows. The top five coal-producing states--Wyoming (40% of the total), West Virginia (11%), Kentucky (8%), Illinois (6%) and Pennsylvania (6%)--contribute the majority of the country's coal production.
Click on the image at right for an EIA graph of U.S. quarterly coal production.
For the first 10 months of 2017, U.S. coal production was estimated at 656 million tons, 59 million tons (10%) higher than production for the same period in 2016, the EIA said. The agency expects annual production to total about 790 million tons this year and in 2018.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
Five of the country's largest coal producers--Alliance Resource Partners L.P. (NASDAQ:ARLP) (Tulsa, Oklahoma), Arch Coal Incorporated (NYSE:ARCH) (St. Louis, Missouri), Cloud Peak Energy Incorporated (NYSE:CLD) (Gillette, Wyoming), Peabody Energy Corporation (NYSE:BTU) (St. Louis, Missouri) and Warrior Met Coal Incorporated (NYSE:HCC) (Brookwood, Alabama)--reported a collective $801 million in third-quarter earnings before interest, taxes, depreciation and amortization. That represents more than a 76% increase from third-quarter 2016 earnings of $454 million, and Peabody Energy's highest profit since 2012.
It's a sharp reversal from a few years ago, when low coal prices and excessive debt drove many of America's largest miners into bankruptcy. With many producers now emerging with stronger balance sheets, the coal industry is benefitting from a period of higher seaborne prices for thermal coal, which is used for power and heat generation, and metallurgical (met) coal--used to produce coke--the primary source of carbon used in steel-making.
The elevated prices can be attributed, in part, to soaring Chinese imports. Exports helped support pricing and sales volumes in the third quarter for Alliance Resource Partners, with increased domestic and overseas demand likely to lead to strong sales in the next several quarters, company executive said last month. Industrial Info is tracking $175 million in active Alliance projects and is monitoring 10 plants in the U.S.
"Exports have played a major role in supporting U.S. coal prices in 2017, and it appears domestic markets have bottomed-off very low levels," Alliance Chief Executive Joe Craft said in an earnings-related call.
Alliance expects to see higher sales to domestic utilities because of a number of legacy contracts with higher-cost mines that are set to expire. However, the producer said it also encountered "adverse geological conditions" at its Hamilton mine in Dahlgren, Illinois, during the third quarter, which caused results to come in below expectations. However, the company partially made up for that issue by selling coal from its inventory, and the mine is now back up to its planned production levels. For that reason, Alliance still expects to meet its full-year guidance.
Fewer than six months after emerging from Chapter 11 bankruptcy protection, Peabody Energy reported a profit of $203 million on revenues of $1.48 billion for the third quarter of 2017. Industrial Info is tracking just over $677 million in active Peabody projects in Australia. Industrial Info's database also includes 25 Peabody plants in the U.S.
"We view this as a striking quarter for the Peabody team," Glenn Kellow, president and chief executive officer, said in an earnings call. "We've made progress across the board."
Powder River Basin (PRB) coal continues to be Peabody's most lucrative operations, with its mines bringing in about $421 million in revenue in the third quarter. The company's Australia metallurgical mines nearly matched that, however, at around $416 million.
Peabody's PRB assets include the Caballo, North Antelope Rochelle and Rawhide mines, where year-over-year production remained rather flat. Collectively, the mines produced 33.7 million tons in this year's third quarter, compared with 33 million tons in 2016. Year-to-date production is up significantly to 93 million tons, versus 80 million tons for the first three quarters of 2016. For more information, see October 26, 2017, article - Coal Giant Peabody Tries to Take Luminant Power Plant Closure in Stride.
Cloud Peak's PRB mines in Montana and Wyoming continue to ramp up coal exports, with another 1.3 million tons sent overseas in the just-ended third quarter, the company reported. Industrial Info is tracking $400 million in active projects involving Cloud Peak. Industrial Info's database includes three Cloud Peak plants.
Cloud Peak's exports resulted in an improved net income of $2.6 million for the quarter, compared with a $1.6 million loss in the prior-year quarter. While still showing a loss for the year, Cloud Peak ended the quarter with about $523 million in liquidity.
Another metallurgical coal producer, Warrior Met Coal Incorporated (NYSE:HCC) (Brookwood, Alabama), reported third-quarter 2017 net income of $119.7 million, compared with a net loss of $33.6 million in the prior-year quarter, on revenues of $107.3 million, versus revenue of $5.8 million in the prior-year period. Warrior executives said the market for high-quality, premium met coal remains volatile, "reflecting stronger Chinese demand and ongoing disruptions to supply from U.S. and Australian miners." Industrial Info is tracking $12 million in active Warrior projects in the U.S.
"Strong sales volumes, coupled with high-price realization and an exceptionally low-cost structure enabled us to achieve strong free cash flow conversion," Warrior Met Coal Chief Executive Officer Walt Scheller said in an earnings call.
Warrior continued to make progress in the ramp-up of mining operations toward its historical annual production level of around 8 million tons. The company produced 1.6 million tons of met coal in the third quarter, nearly three times the amount produced in the prior-year period. For more information, see Industrial Info's October 18, 2017, article - U.S. Coal Production Expected to Rise 8% in 2017.
"We are undertaking the moves necessary to increase our production levels in a responsible manner, and that work will continue in the months ahead as we move closer to achieving the nameplate-production capacity in our two mines," Scheller said.
Coal is currently mined in more than 50% of U.S. states, data from the U.S. Energy Information Administration (EIA) shows. The top five coal-producing states--Wyoming (40% of the total), West Virginia (11%), Kentucky (8%), Illinois (6%) and Pennsylvania (6%)--contribute the majority of the country's coal production.
For the first 10 months of 2017, U.S. coal production was estimated at 656 million tons, 59 million tons (10%) higher than production for the same period in 2016, the EIA said. The agency expects annual production to total about 790 million tons this year and in 2018.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
