SÃO PAULO The difficult conditions facing the global metallurgical coal market will probably lead some U.S. mines and companies to go out of business, a senior industry executive said at the 6th Coaltrans Brazil and South America conference in Rio de Janeiro.
"I hate to say it, but not every coal mine is going to survive in this market," Jack Porco, president and chief commercial officer of Latrobe, Pa.-based XCoal Energy & Resources LLC, told delegates April 26.
U.S. coking coal producers have significantly reduced their output and idled mines over the past several months to adjust to market conditions. They have also been looking to increase their metallurgical coal exports and diversify their markets, he said.
"However, the global markets for U.S. coal exports wont save every mine in the United States," Porco said, adding that U.S. coal producers are likely to announce still more production cuts. "There have been reductions, and there are likely to be more reductions."
Coking coal prices will have to increase following these adjustments if U.S. producers are to remain in the market long term, he said.
American companies "wont participate in the market just for the sake of participating," Porco warned.
Most U.S. miners placed "large bets" in the coking coal market by carrying out expansion projects and acquisitions a few years ago, he said.
Coking coal prices would need to be about $200 per tonne in the medium term for companies to continue to be active in the market, Porco told delegates. "We hope to see some improvement, for our customers and ourselves."
AMM sister publication Metal Bulletins coking coal indices were at $161.79 per tonne c.f.r. Jingtang, China, for low-volatility material and $147.83 per tonne c.f.r. Jingtang for mid-volatility materials last Friday.
Despite the challenging environment, Porco noted that U.S. coal producers are at least no longer in the high-cost area of the curve of global coal production as a result of the investments they have made in productivity and output cuts at higher-cost mines. "Were now in the middle to the low cost of the curve," he said.
A version of this article was first published by AMM sister publication Steel First.