Arch expects lower US thermal coal sales in 2024

Market: Coal, Coking coal
15/02/24

US coal producer Arch Resources said 2024 thermal coal shipments could fall by as much as 24pc from last year, given declines in coal consumption and continued decreases in natural gas prices.

Arch said today it expects to sell 58.6mn-65mn short tons (st) (53.2mn-59mn metric tonnes) of coal this year, including 50mn-56mn st of thermal coal. That is down from the company's full-year 2023 sales of 74.9mn st, including 65.6mn st of steam coal.

The producer plans to scale back production from its Powder River Basin (PRB) mines, citing weaker market dynamics. The changing demand resulted in a number of negotiated shipment deferrals in response to customer requests.

Arch expects output from the West Elk mine in Colorado to be around 4mn st this year, up by about 1mn st from 2023. About 1mn st of that coal has not been priced yet.

Production at the West Elk mine is "back to normal levels" following lifting of a force majeure that was implemented last year after Arch found a layer of clay in the seam that compromised coal quality. Through this year until mid-2025, Arch will transition the seam to an area where the coal is thicker and of better quality, which should translate into higher sales volumes and stronger relative pricing, Arch chief operating officer John Drexler said.

Arch's 2024 thermal coal shipment forecast is slightly below the 54.2mn st the company has under contract to sell this year, and more in line with its 52.8mn st of already priced and committed volumes, Arch chief executive Paul Lang said.

Given natural gas prices have fallen "so much in the last couple of weeks," coal demand will likely continue to drop, Lang said.

Lang said there is going to be more volatility in the industry as the role of coal in the US diminishes. Arch's internal view is that PRB coal consumption will continue to drop by about 5-10pc a year.

There have been some delayed retirements of coal-fired power plants lately, but $1.50-$1.70 /mmBtu natural gas prices are a green light telling utilities it is okay to close their coal units.

Arch sold 15.5mn st of thermal coal in the fourth quarter, down by 3.7pc from 16.1mn in the year-earlier period.

Thermal coal volumes fell in the fourth quarter because negotiations with customers last year resulted in moving some sales to forward years but the company was able to sell additional volumes in conjunction with those deferrals.

Arch expects to sell 8.6mn-9mn st of coking coal this year. Arch's metallurgical coal sales in the fourth quarter rose to 2.3mn st from 2.3mn st a year earlier.

Arch's fourth quarter profits fell by 76pc to $114.9mn compared with $470.5mn in the year-earlier period. Revenue dropped by 10pc to $774mn.

By Elena Vasilyeva

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