US coal and natural gas producer Consol Energy is diversifying low-vol hard coking coal sales away from China to concentrate more on domestic and other international markets, the company told analysts.
Against a backdrop of weak global demand and relatively low coking coal prices, the Pittsburgh-based producer said in a presentation delivered Thursday that its "financial strength permits disciplined pricing." Consol said it has been selling its Buchanan low-vol HCC to customers in the US, Europe, Brazil, South Korea and India.
Spot pricing into the huge Chinese steelmaking industry is typically the lowest globally, as it is often used as a market of last resort. US miners are further disadvantaged by higher cost freight to China compared to Australian competitors.
No spot sales of Buchanan to China have been heard recently.
The company cited weak demand particularly from Asia, and low export pricing for its decision to reduce work hours at Buchanan, laying off 188 employees. Buchanan shipped 1.1 million st in Q1 2014, of which 489,000 st were sent to customers in China.
Another similar US low-vol from another producer was heard offered Wednesday for a 130,000 mt vessel for mid-July arrival at $115/mt CFR China, based on a 45-46% CSR, 6.5-8% ash specification.
Consol described the 5.2 million st/year capacity Buchanan mine in Virginia as a "sleeping giant for cash flow" able to provide additional significant cash on the back of any upswing in the market price.
"Any market improvement will result in a boost to cash," it said.
Consol said a $10/st improvement in sales prices would result in $50 million of extra cash from Buchanan, a single longwall operation.
The company's Q1 2014 coal prices were are at or near a five-year low.
The global benchmark for coking coal was agreed at $120/mt FOB for Q2, falling from $143/mt in the prior quarter to the lowest industry reference since 2007.
Consol expects to export a total of 7 million st in 2014.
