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Peabody sees strong coal demand from India
Coal Insights Bureau
US-based thermal and coking coal major Peabody sees subdued demand for thermal coal in the domestic market due to low gas prices.
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While global prices will be supported by import demand from India and other Asian countries, adequate coal stocks elsewhere will put coal prices under check, said Jim Grech, CEO, Peabody, to investors.
“We now have lower LNG prices and high coal inventory levels in Europe as shortterm headwinds in terms of pricing across the globe,” he said.
In US, during the March quarter, natural gas prices weakened further due to record gas production levels. US natural gas prompt prices are approximately $2.25 per mmbtu.
“Overall, near-term demand for US thermal coal is expected to be muted as a result of low gas prices and stronger renewable generation. However, as summer weather brings stronger total load demand an increased LNG export will pressure gas prices and demand has the potential to increase in the second half of 2023,” Grech said.
Peabody sees strong demand from Asia, particularly from India due to strong economic activity.
India has shown signs of improved economic activity early in 2023 resulting in increased power demand and elevated coal imports despite elevated domestic production. Overall, the demand for seaborne thermal coal is robust and supply remains constrained across the globe,” Peabody head said.
“Global thermal coal prices stabilised in March and recently showed improvement due to supply disruptions in Colombia, Africa and on-going strong demand from India, China and ASEAN countries. It will shoulder seasonal conditions and healthy field stocks are influencing demand elsewhere,” Grech told investors.
China ended its official ban of Australian coal imports providing additional demand for Australian thermal coal which has resulted in Australia import rates of over 4 million tons per month.
“Domestic coal production and renewable generation have been trying to start the year. However, import demand has been higher year over year as overall coal demand has been strong. In the first quarter of 2023, the run rate of imports is close to all-time high of approximately 400 million tons,” he said.
The seaborne metallurgical coal market during the March quarter was characterised by ongoing volatility as global macroeconomic turbulence counteracted improving demand and further weather-induced supply disruptions in Australia, he said.
Met coal price volatility continued and early March increases was eroded in the second half of the month amid macroeconomic sentiments, he said.
January-March export realisation down 10%
Peabody’s thermal coal realisation from exports have fallen by 9.78 percent to Aussie $148.34 a ton during the March quarter from Aussie $151.61 earned during the previous quarter. During the quarter, the seaborne thermal segment shipped 3.6 mt, including 2.1 mt of exports.
Export shipments were 0.2 mt lower than the December quarter due to a longwall move at Wambo and continued recovery from heavy rains in the fourth quarter of 2022.
“The average realised export price was nearly flat with the fourth quarter of 2022 as lower hedged ton settlement volumes offset a 33 percent decline in average Newcastle benchmark prices. Total segment costs of $51.01 per ton were 18 percent higher than the December quarter primarily due to anticipated lower production and less favorable Australian $ exchange rates. The segment reported Adjusted EBITDA margins of 47 percent and Adjusted EBITDA of $164.0 million, in the first quarter,” the company said. As for met coal, during the March quarter, the seaborne segment shipped 1.3 mt at an average realised price of $220.60 per ton.
Tons sold were 0.7 mt lower than the prior quarter due to lower production at Shoal Creek and CMJV (rail and port congestion from heavy rains in January), partially offset by higher production at Metropolitan.
Total segment costs of $151.13 per ton were 18 percent higher than the prior quarter primarily due to anticipated lower production and less favorable exchange rates.
The segment reported 31 percent Adjusted EBITDA margins and Adjusted EBITDA of Ausie $90.8 million, in the first quarter of 2023.
