Barron’s Senior Energy Writer Laura Sanicola and Andy Blumenfeld, data analytics director of McCloskey by OPIS, discuss what’s ahead for energy this week.
Watch this week’s episode for insights into how recent steel and aluminum tariffs, coal market dynamics, and potential policy shifts could impact the energy sector.
Transcript:
LAURA SANICOLA: Hi, everyone. This is Laura Sanicola, author of Barron’s Energy Insider, and I’m here today with Andy Blumenfeld, data analytics director of McCloskey by OPIS. Andy, thanks so much for being on with me today.
ANDY BLUMENFELD: Oh, happy to be here.
SANICOLA: So, last week’s steel and aluminum tariffs formally went into effect. Are we starting to see a response from the coal markets that you follow at OPIS?
BLUMENFELD: Well, so far, there has been little to no response in terms of the coal companies themselves. Looking strictly at their equity values, they have actually not shown any improvement. At this point, we’re trying to understand exactly what this means in terms of US coal supply.
It actually turns out it could be a net negative for them because we do export about three to four million tons of coal to Canada, for example.
And the question that we’re having right now and we’re trying to grapple with is trying to understand whether or not the Canadian steel producers will be able to successfully pass along that tariff. Most of the Canadian steel gets used in the US market, especially in the auto sector. So what we’re trying to determine is will that affect Canadian steel production and therefore will it affect US coal demand, going up into Canada? So it could turn out to be a net negative for US, coal interests who are the primary supplier of metallurgical coal to those Canadian steel mills.
SANICOLA: So do you think that we’ll start seeing that play out in the market in the next few weeks as we digest the news of the tariffs?
BLUMENFELD: I think that that’s very much that’s going to show up. However, I also look at the situation with the Trump administration right now and things, as we have learned, can be quite volatile. If the US automakers start to raise enough of a concern, as we’ve seen previously, this could easily be reversed. So, that’s really the uncertainty has really been the biggest challenge for a lot of the US interests, especially on the coal production side.
SANICOLA: Oh, there’s a lot of coal coal uncertainty going on right now. I spent the last, week at CERAWeek in Houston. It’s big energy conference for those who, don’t know or aren’t familiar. And a big topic of conversation from representatives from the Trump administration was how they’re considering emergency powers to keep coal plants running and prevent more coal retirements, especially as, there’s a big need for more power generation to support domestic data centers and AI.
But, I noticed it didn’t really give coal stocks a lift. They were not, very dramatically impacted by that news at all. So, yeah, if you could tell us, what can the administration do, if anything, to support the domestic coal industry?
BLUMENFELD: So the concept of preventing further retirements, and there’s even a part of that proposal is is to bring some of the plants that were newly retired, back online. There’s quite a few obstacles to get there. And at this point, prices for coal have really not appreciated this year. There’s been some small movement for US thermal coal, but the situation with the seaboard market means that some of the coal that was targeted for overseas is now actually starting to hit the US domestic market. So benefit from any increase right now is also being offset by some of the export volume that’s coming back into the market. So the other part of this is that US coal inventories at power plants are still very high and right now we haven’t really seen the effect of the high natural gas prices, say on the coal prices. Now coal demand is up, but most of that increased demand is coming from the reduction of those inventories.
So until everything gets corrected, the coal suppliers should really have to sit tight and wait for the market to come around. Now we think it will, but right now it’s not showing up in the price and we’ll see exactly how the how natural gas prices perform over the next three to six months.
SANICOLA: When do you think we might see that correction?
BLUMENFELD: We think it could happen as early as this summer. Again, there’s a there are a lot of variables, including the weather, which which are at play here, but we think that that could start to move coal prices higher, you know, later in the second quarter.
SANICOLA: Alright. Well, something to keep an eye on. Thanks again, Andy, for joining us, and we’ll see everybody next week.
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.
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