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.