US met coal supply may slowly fill the growing gap with demand spurred on by higher seaborne prices, consultancy John T Boyd Company said Tuesday.
Exports are estimated at 31 million st in 2016, based on output trends, after supply cuts across the Appalachians and in Alabama, said William Wolf, vice president for Business and Market Analysis at John T. Boyd.
US coking coal exports for the year through June were down 23% to 18.3 million mt on the year earlier period, while thermal coal exports were 46% lower in the first six months.
"In the US there is only limited capacity that can be put on immediately," Wolf told the Platts Coal Marketing Days conference in Pittsburgh. "We are seeing the supply response to the market conditions from 12-15 months ago."
The group expects a fall in supply from mines under Alpha Natural Resources before restructuring split ownership to a combined 9.5 million mt, while other miners trimmed output.
The ERP owned Pinnacle and Oak Grove low-vol mines may produce 2 million st apiece, while Rosebud mines may produce 1.3 million st, the consultancy estimated based on data through Q2 2016.
In the past five years, the number of operating coal mines in central and northern Appalachia has dropped by two-thirds, he said.
Wolf expects Australian mines to respond to market conditions and boost shipments, but this will take time. Several mines face production difficulties, and demand has outpaced supply as China increased its proportion of coking coal supplied by imports over the course of the year.
Australia will not be able to act "as quickly as before due to closures and mines in care and maintenance," he added.
"Buyers are facing uncovered positions, which could bid up market further. Strength in current met coal pricing will go on through the first quarter of 2017," he said. "The rally could last longer if certain macro-economic factors fall our way."
Wolf explained that currency fluctuations between the US dollar and producer currencies, as well as the US elections and Chinese government-led policies affecting mining and the broader economy, were all factors at play with regards to coal pricing.
