Alpha Natural Resources, Inc (NYSE:ANR) – what’s the last recourse ?
Coal prices are dipping and literally shattering big United States coal market players such as Alpha Natural Resources, Inc (NYSE:ANR). The weak demand for metallurgical coal in China is responsible for the current ill-health of the coal sector.
Chinese has recently proposed a ban on all imported thermal coal. Indonesia is definitely one country that is going to he impacted heavily by the ban, but how exactly and why are American coal producers squirming? Is there an underlying opportunity somewhere in the recesses of this ban?
The main points of the proposed ban, which seems to be on its way to turning into a reality, are to restrict the imports of all thermal coal that are below 8,200 Btu/lbs, or stand above 25% ash adb as also 1% sulfur adb.
The coal files
Coal traders in China are of the opinion that some revisions are being discussed. These may relax some of the terms of the proposal thus dulling its impact. There is no confirmation about this from Chinese government officials. In 2012, the United States coal exports to China, stood at 10.1Mst. This amounts to a little below 10% of the total annual U.S. exports. However, 6.9Mst out of that amount was metallurgical coal, which will not be affected by the ban. The remaining 3.2Mst is what will have to looked at as far as the ban is concerned.
Is the ban impacting?
The significance of this proposed ban on exports in the U.S and the near-term production is pretty opaque right now. For U.S. producers this is definitely good news. However, there is unfortunately no apparent, immediate trading-opportunity from the ban. There are a few transparent long-term impacts though. China has made it very clear that it is eager to open-up the PRB. It will be the new high-volume supply source and the caloric content limit will be set just under PRB averages. In addition to this, the ILB producers who plan to export their products to China under this proposed ban will be required to blend-in PRB coal before shipment.
Though there are no immediate and evident impacts, the news is definitely a bright one for PRB producers such as Alpha Natural Resources, Inc (NYSE:ANR), Arch Coal, Cloud Peak, Peabody and Westmoreland Coal. Ironically, ILB producers now face a possible hurdle if they continue relying on Chinese exports for a major part of their revenue.