Barron’s Senior Energy Writer Laura Sanicola and OPIS Data Analyst Andrew Blumenthal discuss what’s ahead for the US coal markets this week.

Watch this week’s episode for insights into how US refiners are reacting to China’s tariffs on US coal exports and the impacts already being felt by US producers.

Transcript:

LAURA SANICOLA: Hi, everyone. This is Laura Sanicola, author of Barron’s Energy Insider. And joining me this week is Andrew Blumenthal, Data Analytics Director of McCloskey by OPIS. Andrew, thanks for joining me today.

ANDREW BLUMENTHAL: Laura, glad to be here.

SANICOLA: So we started the week thinking we would be talking to OPIS about the impact of tariffs on crude oil and companies, but that story sort of resolved itself as negotiations got pushed out another month. And now we’re turning our attention to China’s tariffs on US coal exports. Can you remind us again how much coal the US exports and why China put these tariffs on?

BLUMENTHAL: So the US in twenty twenty four exported about a hundred and eight million tons of coal.

It’s a significant part of the US, coal market.

Of that volume, about, twelve million tons of that went to China.

So that’s, you know, roughly twelve percent of the coal that exported from the US.

The big part of that coal, though, is coal going for steel production. That would be metallurgical coal. So, roughly about nine million of that exports that went to China is going into the steel markets. So it is it is important, especially for US, metallurgical coal producers that serve that marketplace.

So it is a surprise. It was somewhat of a surprise, I should say.

But it does come after President Trump invoked, you know, a ten percent cross board tariff on on Chinese goods coming into the US. This is this is a countermeasure that’s been put in place by China, and it includes, both coal and LNG and other products, including rare earths. But at this point, it’s, coal looks like it’s gonna take a a fairly substantial hit from this from this tariff.

SANICOLA: And which US companies, are most affected by the tariffs?

BLUMENTHAL: So it really cuts across the board on many of the US metallurgical producers. This would include, Core Natural Resources, which is the new company that was Consol and Arch, Coronado Resources, as well as Warrior Met and Alpha, as well as some of the international traders who actually buy US coal and ship it into the into the international marketplace. Now they’re gonna have to, look for new homes for that coal.

SANICOLA: So what impacts are we seeing from the tariffs right now? And do you think these companies will recover financially as the market rebalances, or is this more of a permanent hit that they’re gonna have to be prepared to take as the trade wars, carry on?

BLUMENTHAL: So at the moment, we are we have heard that there is some vessels that are enroute to China that are being reconsigned. So they’re gonna, the traders or the owners of that, of those cargos are gonna be looking for a new home for that coal. That is taking place, so the impact of the tariff is already being felt by US producers.

Now we’ll see how successful they are in finding a new a new home for that coal.

One would think that over time, the international sea route markets will balance, and it really won’t have too much of a material impact on earnings.

But there is gonna be some displacement at first while the market adjusts to the to the new realities.

SANICOLA: Obviously, coal and LNG are both used for power production across the globe. What other factors are impacting these companies this winter, and what’s the outlook as we head later into the year?

Well, interestingly, in the United States, this very cold start to twenty twenty five, has been a big bonus for the US domestic producers.

We see, coal use in January at fairly high levels, and it’s bringing down some of the excess inventories.

Thus far, we haven’t really seen it translate into coal prices yet, but we think that, with higher natural gas prices and the two competing against each other, we think that coal will pick up, some market share in the first half of this year, and those inventories coming down should signal higher prices later in the year.

SANICOLA: Great. Well, thanks so much for joining us, and we’ll see everybody next week.