From the archives: Jeremy Sussman, Clarksons Platou Securities
20.11.2018 by Tatiza Gondim, Marketing Manager at Coaltrans Events
Describe the state of the US coal industry:
Recovering. After a few years of deeply depressed met & thermal coal pricing, the past few years have provided a period of higher prices, which have allowed both met and thermal coal companies to recover. With that said, cheap natural gas prices have hurt the thermal coal recovery to an extent. Given this dynamic, met coal producers are generally thriving more than thermal coal producers. When one adds in the balance sheet restructuring that many prominent companies went through, a number of Met coal producers are generating as much cash today as they have at any point over the last 15 years.
Why have met coal prices remained elevated, and above most expectations?
China, and financial discipline. When China stopped subsidizing a massive amount of loss making production in 1H16, this changed everything. Since then, we’ve seen about 10% of high cost Chinese production come offline. Coupled with a lack of investment globally - we estimate global met coal capex is still down over 70% from the peak 5 years ago - and we’ve seen a sustained tight Met coal market for the past couple of years. With limited investment in new mines, we expect the market to remain in a deficit through the end of the decade.
How about M&A in the coal space?
You’ll have to listen to the panel to get our latest thoughts on this front! With that said, we expect 2019 to be an active year on the M&A front, both on the met coal & thermal coal front.
Describe your role at Clarksons:
My primary role is to write research on the global coal space. My team is responsible for setting our US & global price forecasts, and for making recommendations on which companies are attractive investments. As a traditional equity analyst who has been covering the US coal space since 2005, I benefit immensely from the real-time, on-the-ground knowledge of the coal market throughout Clarksons.
You can hear more from Jeremy and his thoughts on M&A in the US coal space on 31 January 2019 in Miami, as part of the 19th Coaltrans USA.
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