Transcript Doyle BtuBaron NCTA Sep 2015

September 15th, 2015
Canary in the Coal Mind: Dead, Alive or in a Coma?
Stephen Doyle, President
BtuBaron, LLC
NCTA Annual Meeting &
Conference
Grand Hyatt, Denver, CO
About BtuBaron LLC
Email: [email protected]
Website: www.btubaron.com
Twitter: @btubaron
Address: P.O. Box 23254, Glade Park, CO 81523
Work: 970 256 1194
Cell: 917 363 3719
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The Coal Industry
The Anti-coal Crowd
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Discussion Topics
 Thirty-three Years of Coal Wisdom
in Three Minutes.
 US Domestic Market Assessment
 Seaborne Market Assessment
 Why the Next Upcycle could be a
Wild One/When it might happen
 Don’t Forget: #!%* Happens
 The Elephant in the room (climate
change)
Disclosure: Steve Doyle has long positions in the following coal companies; ARLP (Alliance
Resource Partners), BTU (Peabody Energy), CNX (Consol Energy), CNXC (CNX’s MLP), HNRG
(Hallador Energy) and NRP (Natural Resource Partners).
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During the Past Few Years …
Coal Equity Hell
Regulatory Attacks
Global Oversupply
Massive Debt
Renewable Energy
Weaker A$
Cash Burn
Nagas vs Coalgen
China GDP Growth
Surety Bonds
MATS Retirements
High Mining Costs
Bankruptcies
Non-Winter ‘11/’12
Take-or-Pay Pain
Barriers to Exit
Polar Vortex ‘13/’14
Steel Overcapacity
Forced Cutbacks
Shale ‘revolution’
GHG Regulations
China/Coke & Steel
Oz Mining Costs
Consolidation
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The Coal Sector is Not for Sissies!!
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US Thermal Prices: 2010 to Present
Central App
PRB 8800
Illinois Basin
(Source: Evomarkets.com)
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Top Two US Demand Components
in Decline
(Sources: Doyle Trading Consultants; EIA)
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The New Normal for Utility Demand?
(But I don’t expect it to get worse)
$4.37
$4.00
$2.75
$3.73
$4.39
$2.82
(Sources: Doyle Trading Consultants; EIA, CME)
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Total US Supply & Demand:
Relatively in balance until this year
(Sources: Doyle Trading Consultants; EIA)
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Seaborne
Market:
Fifth Year
of Price
Decline
(Source: Doyle Trading Consultants LLC)
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Strong Dollar
Hurts US
Exporters
AUD/USD Forex Rate
(2010 – Sep 3, 2015)
(Source: Ex.com)
(Sources: Ex.com, Doyle Trading Consultants LLC)
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Chinese Coal Imports vs US Coal Exports
When you add in
the impact from
Chinese coke and
steel exports, the
story is even more
sobering.
(Source: Doyle Trading Consultants LLC)
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The Proverbial Canary:
Dead, Alive or in a Coma?
or
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Why am I Card-carrying Believer in Coal?
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US coal sector has never been leaner
Underutilized coalgen capacity (80-100 mm tons)
Higher natgas prices (eventually +$4.00/mmBtu?)
Natgas and renewable market shares (maxed-out)
Global growth & the seaborne market (250-year trend)
FX-rates (what comes around goes around …)
Seaborne thermal demand growth (600 mm MT/yr)
Massive cost-cutting is in the rearview mirror
There is nothing in the coal development pipeline
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Timing the Next Rebound
• US domestic market: 1 – 2 years away
• Seaborne market: 2 – 3 years away
• Exogenous events: Could make my
predictions look silly.
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A Friendly Reminder: #*!@ happens!!
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The Elephant in the Room:
Climate Change
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