Despite being the third largest producer of export metallurgical coal, the United States has always been known as the “swing producer”. High-cost US producers have felt the impact of declining coal prices and have been particularly susceptible to any oversupply in the market.
However, since China’s import ban on
Australian coal in 2020, the US has become the best option and preferred
alternative to Australian coal for Chinese customers. This drastic changeover is
evident in the price indices where Atlantic metallurgical coal prices soared
above Australian benchmark prices and traded at a significant premium.
With Russian supply expected to be limited by
sanctions for at least a few more years, the US is becoming a vital producer for
the metallurgical coal market.
Current Status
High domestic and
export demand for steel is expected to prompt a rise in coal production in the US. Rising
metallurgical coal demand is supported by the country's ambitious infrastructure
investment plans and the disruptions in markets linked to the crisis in Ukraine.
US metallurgical coal exports are expected to
increase by 13% to 40Mt in 2022 and account for 10.9% of global production. US
export supply is forecast to rise further to 47Mt by 2027 and reach peak export
with 52.1Mt in 2038.
The market for US metallurgical coal exports is more
diversified than Australia with more than 50% of US metallurgical coal exported
shipped to countries outside the key demand countries, such as China.

From January to August, US coking coal exports
to India climbed by 170% to 4.8Mt. SAIL (Steel Authority of India Ltd), JSW
Steel, and RINL (Rastriya Ispat Nigam Ltd) ranked as the top three importers.
This drastic increase in import demand from India came as a result of the
country’s aim to diversify its coking coal sources and reduce dependence on
Australian supplies.
Australia’s share in India’s coking coal imports fell from
80% in the first eight months of 2021 to 72% in 2022. AME expects this trend to
likely continue going forward with US exports to become the next option after
Australian coal.
Meanwhile, US coking coal exports to China
dropped by 68% to 1.8Mt in the first eight months of the year, with Beijing favouring
cheaper Russian supplies. Russia's share in China's coking coal imports has
risen from 20% in 2021 to 35% this year.
Weak domestic steel demand has also
contributed to the drop in US coal exports to China in 2022, with China's crude
steel production falling by 7% on the year to 693Mt from January to August.
Metallurgical coal types produced in the US
include premium low-volatile hard-coking coal, standard hard-coking coal,
semi-soft coking coal and low-volatile PCI. Export metallurgical coal from the
US has an average CSR of 52, only marginally higher than Russia which produces
predominantly PCI and SSCC products.
The average ash content of US coal is the
lowest globally at 8%, whilst volatile matter levels are relatively high at
30%. The sulphur content of US coal is also relatively high at around 1%—these impurities are key weakness of US coal products.
Key Producers
There are only a few key
metallurgical coal producers in US. These include Coronado, Arch, Warrior Met and Alpha
Metallurgical Resources.
Coronado is one of the more well-known US
operators with their flagship US operation—Buchanan in Virginia. Buchanan is an
underground longwall mine that has been in production since 1983. The mine
produces around 4.5Mtpa of low volatile hard coking coal and PCI product for
both export and domestic markets. The mine has ready access to water,
electricity, and personnel to support its operations.
Coronado benefited from an improvement in the
operation’s average realised price this year, due to continued elevated
demand for US metallurgical coal. The mine is currently in the 3rd quartile of AME’s
metallurgical coal FOB cost curve and has a buffer against adverse price
changes.
Alpha Metallurgical Resources' CAPP-Met complex is a relatively high-cost coal operation, which mainly produces
metallurgical coal for both domestic and export markets.
The complex
is expected to produce around 13Mtpa in 2022 predominantly metallurgical coal
with some by-product thermal coal. The complex has maintained its production
volumes with no major variation throughout the year, but with an increasing
revenue thanks to the robust market in exports amid the Australian Coal ban
by China.
Alpha’s cost profile increased in
2022 primarily driven by increased material and energy costs. Inflation risk
has been quite significant for US producers, but this has been outweighed by
China’s Australian coal ban which has driven Atlantic prices above
Australian benchmark prices in 2022.
Most US producers are expected to
be in the first quartile of the margin curve slightly ahead of BHP and other
Queensland operations. Queensland operators have been hit by the new royalty
rate that has taken a large chunk out of their profit margin. AME expects most
US producers to keep their profitability and remain economically viable in the
medium term.
New Project Developments
Warrior
Met Coal will relaunch the development of its Blue Creek hard coking coal
project in Alabama, which was delayed due to the impact of Covid-19, market
conditions, as well as a labour strike.
As market conditions become favorable
and the company’s cash generation has increased, Warrior Met Coal has taken the
first step to go ahead with the development. The Blue Creek project will be a
longwall mine expected to produce around 4.4Mtpa of premium High Vol A met coal
for over 10 years.
Coronado
Global Resources is planning to expand its Buchanan coal mine in Virginia.
Coronado plans to invest around US$169m to increase production capacity at the
complex, creating 181 additional jobs. AME anticipates that the
proposed expansion is designed to meet surging demand from European countries,
with the EU looking at alternative sources to replace Russian coal.

US ESG Movements
The US government set a new emission target
in April 2021. This target is focused on achieving a 50%-52% reduction from
2005 levels in economy-wide net greenhouse gas pollution, or -4,179MtCO2e, in
2030. Further, the US aims to reach net-zero emissions by no later than 2050.
US policies implemented to accelerate the transition to a clean energy
economy and reach emissions targets are focused on actions that cover
investments in emission-reduction in the electric power sector, transportation,
buildings, industry, agriculture, forestry, and land use.
The green movement has also engaged domestic metallurgical coal producers and major companies have started to
commit to some ambitious net-zero targets.
Coronado has a directional intent to
have net zero operational emissions by 2050. Coronado commits to a 30%
reduction in Scope 1 and Scope 2 greenhouse gas emissions by 2030. The company
is developing a methane-capturing project at Buchanan which aims to convert
methane to carbon dioxide (CO2) reducing its carbon footprint. Buchanan’s
fugitive emissions are projected to be reduced by 61% by 2030.
The
Buchanan mine VAM project officially commenced in July 2022. The project
utilizes the latest technology to convert fugitive methane gas emissions to carbon
dioxide. The project will reduce Buchanan's emission intensity by 22.25 times.
Initial performance is encouraging with approx. 94% emission destruction
efficiency. Overall projections show a reduction in Buchanan emissions by
approximately 61% by 2030. While Coronado is also investigating other projects
to reduce its carbon footprint, if the VAM projections are achieved, this
project alone will meet its 30% reduction target by 2030.