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CONSOL Energy Hopes to Get Baltimore Coal Exports Up and Running in June



May 7, 2024 - CONSOL Energy's ability to ship coal from its Pennsylvania mines to foreign countries continues to be constrained by the Port of Baltimore's closing after the Francis Scott Key Bridge collapse on March 26, although the company hopes to get back on track quickly if the shipping channel reopens by the end of the month.

"I think we can start right out of the gate on June 1, moving everything we have planned," CEO Jimmy Brock said during the Canonsburg-based CONSOL's first-quarter earnings call Tuesday.

The March 26 collapse, caused by a hit to the bridge by a large cargo ship, killed six construction workers on the bridge and halted operations in and out of one of the country's biggest ports. That was a massive blow to the operations of CONSOL (NYSE: CEIX), which ships about 60% of its coal to the export markets in railroad cars from Greene and Washington counties through its own CONSOL Marine Terminal.

Having that terminal and its cost savings has been a major weapon in the past for Consol. But with the shipping lanes out for at least two months, CONSOL has had to find other ways to ship coal overseas, primarily by moving coal from Pennsylvania via railroad to another coal-loading terminal in Norfolk, Virginia. Brock thanked the railroad companies for their flexibility.

"It has allowed us to move 50% of our planned export volumes," Brock said. That's between 600,000 and 800,000 tons of coal per month compared to between 1.2 million and 1.5 million tons it would normally ship out of the Baltimore marine terminal in a normal month. Terminal revenue was $25 million in the quarter, compared to $27 million a year ago.

SVP/Chief Commercial Officer Robert Braithwaite said shipping coal through Norfolk instead of Baltimore adds about $10 a ton in extra costs, which is about $14 million at the current volume. Cash costs per ton were $40.29, compared to $33.61 a year ago. The company is reducing capital expenditures and taking other measures to control costs, Brock said. It's also speeding deliveries of coal to domestic customers, which is a lesser share of the company's revenues than in previous years.

The extra costs should go away once CONSOL is able to return to normal operations at the CONSOL Marine Terminal, which is undergoing planned maintenance now instead of later in the year to take advantage of downtime. Brock said CONSOL has been delivering coal to the Baltimore terminal, about 450,000 tons stockpiled, for when the shipping lanes reopen.

If there's any good news in the situation, CONSOL said it doesn't foresee any lost business even after not being able to ship as much coal overseas.

"The volume is still there. We haven't lost one vessel as we sit today, everything has been deferred," Braithwaite said. "We continue to get emails from customers (asking when the shipments will resume)."

CONSOL saw lower production and shipments in the first quarter, which included five days of impact due to the Baltimore disaster. The bigger impact will be in the second quarter, with April and May's shipments constrained. CONSOL had $416.2 million in revenue in the quarter, down from $563.3 million in the same period a year ago. It produced 6.5 million tons of coal from its Pennsylvania mines, down from 7 million a year ago due mostly to three longwall moves that limited some production. Shipments were 6.1 million tons, compared to 6.7 million tons a year ago.

Tuesday, CONSOL reduced slightly its full-year guidance due to the impact of the bridge collapse on its business: It now expects coal sales between 24 million tons and 26 million tons compared to its previous forecast of between 25 million and 27 million tons. The cash cost for the full year will be between $37.50 and $39.50 a ton, which is an increase of $1 on either side of the range.

Net income was $101.9 million, $3.39 a share, in the first quarter ended March 31 compared to $230.4 million, $6.55 a share, a year ago.

A lot will depend on when the Port of Baltimore reopens and whether there's any restrictions on the shipping traffic that goes in and out of the port with the channel. President/CFO Mitesh Thakkar said that authorities have told CONSOL to expect the shipping lane to be open by early June and that CONSOL's pattern of not needing to constantly access the channel will help, too. It takes about 30 to 40 hours to load a ship with coal at the terminal.

"We believe demand has been deferred, not lost," Thakkar said.