Demand for coal remains high as power producers plan for 2022
Surging natural gas prices have created high demand for coal.
Peabody Energy Corp., the largest coal producer in the United States announced that is has sold nearly all of the coal it will mine next year with contracts inked for 90 percent of the coal from its operations in the Powder River Basin as well as from its other mines in the United States.
Arch Resources Inc., the No. 2 producer, has lined up deals with utilities for all of its 2022 output from the basin at an average price that’s 20 percent higher than current spot prices, Bloomberg reported.
The global recovery from the COVID-19 pandemic has driven an increase in natural gas prices and power producers are stocking up on coal.
“It’s pretty much sold out,” Peabody Chief Executive Officer Jim Grech said during a conference call. “We only have a small portion left to be sold for 2022 and for 2023.”
Arch’s thermal coal output for 2022 is “fully committed,” CEO Paul Lang said, with an average price for Powder River Basin output of $16 a ton. That’s well above the $13.25 spot price last week, according to S&P Global Market Intelligence. Only a small amount of export tons remains to be sold for the second half of next year. While the company is transitioning to focus on coal for making steel, its thermal mines are helping boost cash flow and the company reinstated the dividend that was suspended last year.
Alliance Resource Partners LP, a coal miner that’s on track to ship about 32 million tons this year, has already locked in deals for 30 million tons next year and almost 16 million tons in 2023.
“Our challenge in America is most producers are all sold out,” CEO Joe Craft said during a call.
As global leaders converge in Glasgow next week for a key United Nations climate conference, these lengthy supply deals are further evidence that the transition to clean energy is going to take some time.