CONSOL Energy’s Pennsylvania Mining Complex (red) holds its cash costs per ton of coal sold to $25.
In its first quarter earnings statement, CONSOL Energy said coal shipments improved to the highest level since the second quarter of 2019. The company reported record quarterly export sales (3.3 million tons), amounting for 48% of its total sales volume for the quarter.
“In the first quarter of 2021, we built on our strong finish to 2020 by producing and selling nearly 7 million tons and expanding our cash margins, as our customers’ demand rebounded strongly,” CONSOL Energy President and CEO Jimmy Brock said. “During the quarter, we continued our pivot to the export markets by expanding our relationships with a wider global end-user customer base including penetrating new markets.
“In addition, we impressively achieved a sub-$25/ton average cash cost of coal sold per ton. And due to our strong net cash provided by operating activities and free cash flow generation, we bolstered our balance sheet by increasing our cash position, while continuing to opportunistically accelerate debt reduction through open market purchases of our second lien notes.”
Pennsylvania Mining Complex (PAMC) sold 6.9 million tons of coal during the first quarter of 2021 at an average price per ton of $41.39/ton, compared to 5.9 million tons at an average price per ton of $43.16 in the year-ago period.
The company said, “Demand for our product has continued to steadily improve from the significant COVID-19 demand trough in the second quarter of 2020, and we have increased our productive capacity for the third consecutive quarter. On the volume front, the 1-million-ton increase in the first quarter of 2021 compared to the year-ago period was a function of increased production and the significant improvement in demand for our product.”
According to the U.S. Energy Information Administration (EIA), coal’s share in the electric generation mix ended the first quarter at 23%, which is improved from 18% in the first quarter of 2020 and 20% for full-year 2020. In a trend reversal compared to the beginning of last year, the EIA also reported that January coal inventory levels at domestic power plants were reduced by nearly 7% compared to year-ago levels and stood at approximately 125 million tons at the end of January. This improvement highlights the strong domestic coal burn in the first quarter of 2021 due to the improved demand and weather compared to the year-ago period.
Furthermore, the EIA estimated that total domestic coal demand will increase by 13% in 2021 versus 2020, which should help to further reduce domestic coal stockpiles.
“We continue to see tightness in the supply of NAPP coal, and the majority of our domestic customer stockpiles are at or below target levels for this time of year,” the company said. “Accordingly, we remain opportunistic in our contracting strategy and modestly added additional coal sales contracts for 2021 and 2022, bringing our contracted positions for those years to 20.5 million and 5.6 million tons, respectively. We continue to remain demand-driven and expect additional spot market sales in the second half of 2021.”
On the export front, the company saw sustained improvements in the seaborne thermal coal market since the end of the third quarter of 2020. Pet coke prices continue to remain high as a result of reduced oil production propping up demand and pricing for NAPP coal in high calorific value markets, particularly India. API2 spot prices remained relatively strong and ended Q1 2021 improved by 37% compared to Q1 2020. As such, the first quarter of 2021 was the highest export shipment quarter in the history of the PAMC both in terms of total tonnage and percentage of tons sold.
During the first quarter of 2021, CONSOL Energy consistently ran four longwalls, but as demand exceeded production, it ran the fifth longwall to meet the improved demand. This now marks the third consecutive quarter in which the company has steadily increased production, achieving the strongest first quarter production on record at the PAMC in spite of running less than a full five longwall schedule.
Based on current contracted position, estimated prices and production plans, the company is targeting 2021 coal sales volume of roughly 22-24 million tons.
