Arch Coal earnings conf call summary; ACI said its customers are no longer calling the co to defer tons as they did a year ago. (4.70 -0.18)
Co call says U.S. steel production is back at 97 mln tons a level not seen since 2010. Co said "While it's no secret that global coal markets have been weak over the last year or so, we are encouraged by the correction that is unfolding." Surprisingly, perhaps, that correction appears to be occurring first in the domestic thermal market, with higher natural gas prices and cold spring weather serving as catalysts.
Co notes that in the U.S. thermal market, in the past year, coal consumption is up over 10% while coal production is down 10%. Co posed the question: How are the U.S. thermal markets fixing themselves?
Just a year ago, U.S. thermal market conditions were quite challenging. In Q1 of 2012, power demand was down 4%. Coal consumption was down 20% and coal production was more or less flat. That situation led to record coal stockpile builds by many.
Fast-forward a year, and power demand is up more than 3% through March. Even more importantly, coal consumption is up over 10% while coal production is down 10%. These trends are helping to correct the significant stockpile overhang at power producers.
Co says that if the current pace holds, in terms inventory reduction, the co would expect coal stockpiles to end the year below 145 mln tons. That would be lower than the 5-yr avg. nationally and a level not seen since Dec 2007.
While the U.S. thermal markets appear to be on the mend, international thermal markets are in the process of bottoming out. Co thinks they have the co positioned for the next upcycle. Co says that it's already seeing evidence that coal stockpiles are correcting. ACI said its customers are no longer calling the co to defer tons as they did a year ago.
Co's met exports were up versus a year ago and its thermal exports were down. That trend is likely to be consistent with the U.S. coal industry overall