May 24, 2023 - Market overviews for coal and steel and roundtable discussions on the government and legal landscape of coal were topics of discussion as the Metallurgical Coal Producers Association (MCPA) 43rd Annual Conference & Expo in Roanoke, WV, wrapped up, Tuesday, May 23.
Day one of the conference on Monday featured a coal executives panel and discussions related to mine safety, the market for steel, the power grid and railroad transportation and capacity.
On Tuesday, Ernie Thrasher, of Xcoal Energy & Resources and Lucas Pipes, of B. Riley Securities, spoke to conference attendees about the current markets for coal and steel with Thrasher beginning his comments noting that steel – and consequently the coke which comes from metallurgical (met) coal used to make it -- is a critical component on the journey to net zero emissions. Steel, he pointed out, is needed to fabricate wind turbines and wind tunnels.
Thrasher gave an overview of met coal prices, noting that while currently pricing is down from a year ago, the spikes seen in pricing in seaborne coal markets a year ago were created by supply side challenges. He projected that prices are likely to rebound later in the current year. The three major suppliers of coking coal, he said are Australia, Canada and the United States. He suggested globally the area to watch is in Mongolia where the use of coal mined there is now going to China, who he noted continues to increase its use of coal.
He touched briefly on thermal coal exports, noting the only way the thermal market is likely to increase is if utilities subsidize the resale of coal they have already purchased.
A slowing global economy, he added, can push the market lower, but he said current coal pricing in the $200 range sustains the long-term viability of the United States met coal industry.
Pipes also addressed coal markets, noting companies mining met coal are well-positioned to manage volatility in the market, having done a good job in positioning themselves to be ready and maintaining their operations. He projected little to no growth supply side. On a global scale he suggested the market to keep an eye on is in Chinese funding of Russian projects.
Pipes suggested ore-based metallic demand is a factor in looking at the steel market, adding there he expected demand growth to outpace supply growth over time.
John Savage, of NextEra Energy Marketing, also addressed conference attendees, focusing on the impact of ESG reporting on publicly traded companies. ESG -- which refers to environmental, social and governance issues – is essentially a scorecard kept on companies across non-financial measures which he said is becoming an essential performance metric for the investment community.
Specifically, he talked about an SEC published draft rule that could require all public companies to report greenhouse gas emissions. The final rule is expected to be issued by the end of the year.
He noted that more than 2,000 companies have made “carbon neutral,” “net zero,” or similar commitments to reduce emissions by target dates between now and 2050. In looking at those emissions, he said there are calculations considering three scopes of operation -- direct emissions; indirect emissions; and indirect emissions from upstream and downstream activities related to the transportation and use of product. The third scope, he suggested, is a difficult one to calculate and one he said companies are putting pressures on their suppliers upstream to lower emissions to help in scoring better in the Scope Three category. The purchase of renewable energy credits, he said, is another measure being utilized.
Mitigating gas emissions, he said, is one of the best ways to address ESG for coal mines. He pointed specifically to a methane abatement project at the Buchanan Mine in Virginia as being one such project.
A government affairs panel gave an update on the state of politics in Virginia and West Virginia, as well as an outlook on state and federal environmental regulatory processes. Panelists included Elizabeth Parker, of Troutman Pepper; Joe Reidy, of Three Point Strategies; and Brooks Smith, of Troutman Pepper.
Parker and Reidy both gave overviews of the political landscape in their respective states of Virginia and West Virginia while Smith addressed the evolving environmental front and focus on environmental justice, permit protections and rulemaking changes in federal entities including the Office of Surface Mining.
The final panel of the conference featured a roundtable discussion by general counsel, including Roger Nicholson, of Alpha Metallurgical Resources; Tyler Adkins, of Ramaco Resources; and Chris Anderson, of Robindale Energy. All three agreed in their roles as counsel, their primary mission is to serve the commercial mission of the company they work for, to have an awareness of the markets in which they are operating and to look for ways they can help companies to avoid the avoidable and how to add value for the company from their actions.
Anticipating potential problems, they all agreed, can further help their clients. They also touched on ESG reporting and preparations underway at their operations to address the potential rules coming out related to that.
They wrapped up the discussion sharing their views of met coal and its future, noting there is a distinct difference between met coal and thermal coal in today’s markets.
Also discussed was the generational nature of coal and the current influx of new miners and other employees coming into the industry. Ways to fill the generational gaps occurring as older workers exit the industry taking with them institutional knowledge and finding ways to mentor the new wave of people coming into the industry, they agreed is critical as the industry moves forward.
As the conference ended, Bob Cline, of Coronado Global Resources, who serves as the current MCPA chairman, noted that throughout the two days of industry discussions at the conference, there had been a lot of good news shared as well as some candid discussion related to challenges the industry faces.
“As I listened to the panels, I saw such a bonding of our groups and that shows the MCPA is working,” Cline said. “We want to continue to make it better. We have a lot of education we have to do for the public and that takes all of us to tell the story that ‘met coal makes steel.’ We’ve got to be bold. We’ve got to be strong and we have to stick together as a team.”