Nathan Martin: Very helpful, John. I appreciate that. And then maybe just one more, if I may. Paul, you mentioned, I think according to some market sources, some small coking coal mines may have idled. Do you think we need more of this to support or even drive us met coal prices higher? Maybe, where do you guys peg the marginal cost to met coal ton these days?
Paul Lang: Nat, I think the source of our statement is we’re getting a lot of people showing up at the door looking for jobs. So it’s a pretty direct data point. If I look at the marginal cost, and I think we’ve talked about this many times, look at most of our peers who are in coal is that 110 to 120 range. We’ve got mines that are probably plus or minus 10 or 15 of that. We are right at the marginal cost at this $220 High-Vol A price. And you have to remember that some of those mines are not producing High-Vol A, they’re producing High-Vol B or lesser back products. So I think that’s what you’re seeing is these marginal mines right on the edge are starting to drop out. It’s just a general slowdown across the east. Frankly, I don’t wish harm on anybody. It is good for the industry, I think it’s keeping things in check. And we’re built for this, I think. We are low cost. We have a high-quality product. I think in another quarter or two of this would not be bad.
John Drexler: So, Nat, look, you are looking at $195 right now, High-Vol B per metric in the vessel on U.S. East Coast. If you agree with our assertion that the marginal cost of production might be in that sort of 135, even 140 range, 195 High-Vol B per metric backs down to once you include the rail rate, something that makes that marginal producer cash negative at this point. And while look we’ve only seen some very small indications of rationalization, the prices have been at these levels for a very brief time. So, certainly, we believe this is going to be weighing on some of those high-cost operations if it persists. I would also add that you’re seeing the same thing in Australia as we continue to see news out of Australia, the way in which the mining costs continue to increase the pressure related to the royalties, the significant sustaining CapEx you’re seeing.
I would say PLV, it’s sort of the same issue with PLV sitting at 240 today, and if you’re getting straight PLV and you are a premier producer, you’re making some cash. But I would say the marginal cost producers are struggling and a lot of them are not producing premium low-ball. They’re producing mid-ball product, or they’re producing a semi-hard or semi-soft. So, look, these do feel, these current prices feel very supportive. And the good news for us is, as a first-quartile producer, we make good cash in this environment. And so, you know, but as we look further out, we do believe there’s potential for some lift.
Nathan Martin: Very helpful, guys. Appreciate the time, and best of luck in the second quarter.
Paul Lang: Thanks, Nat.
Operator: Your next question comes from the line of Katja Jancic from BMO Capital Markets. Please ask your question.
Katja Jancic: Hello? Thank you for taking my questions.
Paul Lang: Hi, Katja.
Katja Jancic: First, on the met coal guide for second quarter. Can you talk a bit more, what would bring you to the lower versus the higher end?
Matthew Giljum: Katja, if you look at volumes in the Met segment, they’re very dependent on vessels, right. So short tons, 80,000 ton of vessel, very quickly, three or four vessels essentially covers that range and that spread that we have here. Clearly, the impact of the Baltimore Bridge and the collapse and the lack of access through Curtis Bay is significant. As we’ve indicated, the logistics team working with our partners, utilizing the strategic investment at DTA have done a fantastic job of redirecting the coal flows. So far, those are going very well. A lot of what is encompassed in that range is going to be dependent on when the Army Corps of Engineers is able to get that deep channel reopened and get the flow of coal going again.
That range encompasses our assumption that, based on what they’re saying, that this opens back up sometime towards the end of May. Clearly, there’ll be a lot of additional logistic considerations whenever it reopens, and we’ll continue to manage that. That’s why we’ve got a little bit of a wider range. And once again, it’s just going to be dependent on timing. But as we sit here right now, we feel good that given the good start, we’ve had managing everything since the bridge did collapse, that we’re going to be able to hit within that range.
John Drexler: And Katja just as Matt referenced, it is a heavy June schedule. So some of it can just come down to that last lake and that last 10-day load window and what gets in and what gets out. But, you know, the fact that it’s 1.9 to 2.2, I think, underscores then just how well the team is moving to redirect the volumes.
Paul Lang: Yes, I think a simple way to think about this is Newport News is about 300 miles further than Curtis Bay. So if you think about, we got to send 6 trains, a vessel plus or minus that is 300 miles, that’s sense the additional rail capacity and the strain that it’s under. So the timing of Curtis Bay reopening is pretty significant. A week or two won’t matter either way with Curtis Bay as far as our volumes.
Matthew Giljum: Hi, Katja, I’ll add to that just to kind of wrap up that discussion. Working with our rail service provider, they’ve done a wonderful job. That’s a big shift for them in realigning their flows of trains and power and people. So they’ve done a great job working to support, be responsive to everything that’s happened with the tragic collapse of the bridge.
John Drexler: And finally, maybe one final point on this, which is the fact that Paul said it’s a meaningfully longer haul, the rate is not that different. Now we do get, I mean the rates fairly equivalent, I will say, through Curtis Bay include in the rate is the transload. If we go to DTA, we’re charging ourselves there. So maybe you could say it’s a $3 differential, but it’s not that significant. We actually have some advantages when we move to DTA. Some opportunities, blending, storage, et cetera, that are useful to ourself. It actually ends up being a move that we are quite comfortable with, but it is a change.
Katja Jancic: And then let’s say, I know you mentioned maybe a week or two delays or in reopening doesn’t make a difference. But what if we see further delays, potentially, what happens? What are your options?
John Drexler: Yes, Katja clearly, we will continue to execute on the opportunity to continue to move poles through DTA. So that’s primary, and that can be extended and extended meaningfully if it is a longer delay on the bridge. The team is also doing a fantastic job of looking at other alternatives and ways to move the coal. We can midstream. We can get coal to the river and take it south down to the gulf. They’re evaluating opportunities, actually to get coal on barges and through the port and the shallow draft of the port of Baltimore and mid-streaming there as well. So, they’re evaluating those types of opportunities now. We are hoping we don’t have to lean on any of those in a meaningful way, but clearly, we can continue to manage, if this is an extended impact.
I’ll share with you every update we get through the Army Corps of Engineers has remained confident on that opening date. Some of the shallow channel work that they’ve done is actually appears to be opening a little bit earlier than what they had been indicating. And so we feel confident that they’re going to continue to work to hit those schedules and we’ll be hitting them. But clearly, if something else happens, we’re prepared and ready and actively looking at, if it does get extended, how we’re going to manage it.
Katja Jancic: Okay. And then maybe just to confirm. Did you say that costs on the met side in the second quarter are going to be $86 per ton?
John Drexler: Let’s call it somewhere in the mid to high-80 range. Katja, that’s, you know, that it is, you know, that’s all going to be dependent on volumes and shipment levels and will be impacted even with the range of the shipment levels we’ve described the 1.9 to the 2.2, so.
Matthew Giljum: But I think Katja the key here is, look, the 87 and 92 guidance that we provide for the year still feels very comfortable. Obviously, the 94 was a little high for Q1. We do believe as we go through from here that you’re going to see us sort of move towards the – sort of the middle of that range and perform a little better, but we still feel very comfortable with that range.
Katja Jancic: And then just one more. On Leer South, are you still expecting around 3 million tons this year and then higher next year? Is that still fair?
John Drexler: Yes, Katja. As we described Leer South, we are very confident this year that we’re going to be at 3 million tons. And then once again, the real benefit occurs in the fourth quarter when we move to district two, where the coal is 15% to 20% thicker. That’s going to allow additional production and volume that will carry over into ’25, clearly and beyond.
Matthew Giljum: Katja, the way to think about it would be from a sort of a cadence perspective. Look, we were lower than ratable in Q1. Q2, Q3, we would expect to be around ratable understanding there’s always variability here. And then Q4, higher than ratable, which bring us into that sort of 3 million ton per year range based on that cadence.
Katja Jancic: Perfect. Thank you so much.
Paul Lang: Thanks, Katja.
Operator: Your next question comes from the line of Michael Dudas from Vertical Research. Please ask your question.
Michael Dudas: Good morning, gentlemen.
Paul Lang: Hi, Michael.
John Drexler: Hi, Mike.
Michael Dudas: Appreciate your thoughts on the global met coal and the tightness you’re seeing some out of the difficulty of supply coming out of the U.S. and elsewhere.
John Drexler: Hi, Mike, you’re a little light. I don’t know if there’s a way to bump up that volume.
Michael Dudas: Can you hear better now?
John Drexler: Yes, perfect.
Michael Dudas: Okay, great. Thank you. Just wondering how your global met customer bases feeling relative to some of the dynamics going on globally on a demand front? And maybe even tied it towards, like, the high volume market and how you see that playing out, especially maybe going into next year or so, given the tightness that could occur in your high-quality product. Is there continue – are you shifting some of the interest levels to certain other regions or countries? Is there – everybody’s talking about India being very aggressive and have some opportunities – China? Maybe give a little sense of how that’s flowing through from your marketing book.
Deck Slone: Yes, Mike, it’s Deck, and thanks for that. We’ve talked a lot about this continuing shift towards Asia, and absolutely, we are seeing interest continuing to grow from new customers, new projects in Asia. Look, it’s not like they’re out there buying with great urgency right now, or you see that in the price, but in terms of the outreach and the engagement that continues to grow. And we’re talking to multiple sort of potential new customers right now who are interested in not just a spot deal, but are interested in term business. So we do feel good about that. And so if we look at the overall fundamentals, the fact is that hot metal production, as Paul referenced and most of China is up about 2% year to date. That’s nothing heroic, certainly, but relative to where we were last year, bumping along the bottom in terms of hot metal output globally, relatively where we were in 2022 when it was down 10% or so, we do see signs of life.
We do feel like there are some positive indications. Chinese imports are continuing to be strong and Chinese imports of particularly high quality seaborne coking coal. So we’ve seen China, China was up 10 million tons in terms of imports of seaborne coal last year, and really stepping up again through the first few months of 2024. I would say there, too, we’re growing interest from some of the world’s largest steelmakers in U.S. volumes and our volumes in particular. You asked about High-Vol A. We certainly think there’s a unique role for High-Vol A to play out there in the way that it facilitates, you know, better coke product when you’re using a lot of disparate products. But the fact is, a lot of these customers are also just looking for high CSR coal, and we can give them high CSR coal.
So, you know, high High-Vol A right now is, you know, is, you know, continuing to be sort of in meaningful demand, recognizing, again that the buyers at this moment aren’t feeling urgency, but the level of interest though is significant. So, yes, I think most importantly, we do continue to see those new glass furnaces that are being built in Asia actually come online and outreach to us about supplying those either in the immediate or the longer term.
John Drexler: And, Michael, I’ll add to that. Just specifically with customers in the High-Vol A product the marketing team does a fantastic job of developing the relationships and then technically marketing that product. Right. It’s relatively new into the region. They’ve done a fantastic job of getting it introduced. Once customers start using it there, they view it as a very favorable product. It’s something that then brings out repeat buyers for that specific product. And so we feel really good about the portfolio, that product, how it continues to get introduced and accepted, and how we expect it to continue to grow as we move forward in that fast-developing region. So, absolutely.
