CRU: Ramaco chief takes bullish stance in bear market

“We believe in 2025 that an additional five million or more tons of production will either shut down or is at risk of shutting down absent a meaningful upward move in pricing. This is principally due to large negative cash margins in the case of higher cost producers, which has led to a number of recently announced bankruptcies in the space. More may follow.”

“In addition, there have been two large longwall mines that experienced an ignition event that have caused those mines to now be offline for extended periods.”

Then there is the Ukrainian war.

“In January we noticed an increase in inbound export customer interest for spot met coal availability. This was primarily due to increased demand for coking coal in Ukraine, stemming from the likely permanent outage of the country’s only domestic met coal mine,” said Atkins.

His comments relate to the Ukrainian military and miners at Metinvest’s Pokrovskoye mine in eastern Ukraine blowing up a shaft so advancing Russian forces could not use the tunnels it serves to outflank Ukraine’s army positions. Metinvest plans to import coking coal from its existing operations in the United States

Atkins also said: “In addition, a large Polish mine had an ignition event around the same time. The aggregate impact of both these domestic and international supply-side factors has created a general tightening of supply in the US.”

“As we move forward into the year, we also expect to see increased domestic idling associated with lower-quality, high-vol production typically destined for Asian markets. Netback economics at today’s prevailing prices are prohibitive for these mostly higher cost operations.”

He predicted some producers will not be able to renew their Asian contracts, many of which begin in April, leading to another round of supply cuts unless prices move up.

With shipments from Queensland, Australia, at their lowest for at least six years, there is potential for higher prices if end-user shortages increased spot demand.

“On the demand side, the world is closely watching the new Trump administration and the potential for additional tariffs on steel imports,” said Atkins. “Based on our analysis, we believe there is roughly two to three million tons of potential upward incremental domestic metallurgical coal demand if new tariffs were to limit steel imports, causing domestic blast furnaces in turn to ramp up steel production.”

His comments accompanied Kentucky-based Ramaco releasing its 2024 results: shipments up 15.7% to 3.99 million st, thanks to new production coming online, but sales revenue falling 4.3% to $663 million (€612 million) due to lower prices, and net profit shrinking 86.4% to $11.2 million. The average cash cost went down to $105 /st from $110 /st.

The company is guiding production this year of between 4.2 million st and 4.6 million st, sales in the range of 4.4 million st to 4.6 million st, with 3.5 million st of committed shipments as of Feb. 28, and average cash costs between $97 /st and $103 /st.

This analysis was first published by CRU. To learn about CRU’s global commodities research and analysis services, visit www.crugroup.com.