Episode 22 - Met Coal Market Recovery and Thermal Coal Dynamics

First and foremost, I think I'll start with met coal markets, which are down over the past week about 3% to 4%.

And on a one-month basis, it's more like 10%.

So the August contract... came in at 215 per ton, which is a little bit lower than that 220 per ton floor that I had sort of suggested we would see here during the remainder of shoulder season.

But as we were talking before the podcast, Joe, especially on the way down and then on the way up, volatile markets have a tendency to overshoot.

So I'm not really looking at 215 as anything indicative that the price is going to go significantly lower.

I'm looking at the ARB spread into China for both second-tier hardcoking coal and for PLV.

And both of those spreads are open relative to domestic coals.

So really, it's just a question of stockpiles.

And when we look at inventories, China's inventories are pretty high.

You know, they have about 15, 16 days of cover, which is on the higher side over the last five years.

And if you look at India, their port cover is around 30 days, which is on the lower side.

But they don't start importing coal again until September.

So they have a little bit of leeway to build inventories.

And that's part of the reason why you're seeing what we're seeing here is that China's steel market has slowed down as they try to rectify their own domestic coal production.

They don't want to come into the seaborne market and exacerbate their already negative steel margins.

So they're just kind of making do with what they have.

They have pretty good stockpiles.

They actually bid up stockpiles.

and prices into March and April, you know, post the Strait of Hormuz concerns.

So really now is kind of what we would have normally expected in like March, April, May, as far as pricing goes.

But as of tomorrow, it's not July anymore.

So, you know, we expect that to reverse here relatively soon within the next week or two and prices to stabilize here right around this point.