Cloud Peak records lower coal shipments

US coal producer, Cloud Peak Energy, has announced results for the fourth quarter and full year 2013.

Shipments of coal from the company’s owned and operated mines for the quarter were 21.7 million t, compared to 23.6 million t in the corresponding 2012 quarter. Full year coal shipments were 86.0 million t, down from 90.6 million t in 2012. Cloud Peak ended the year with cash and investments of US$ 312.3 million, up from US$ 278.0 million in 2012.

Cloud Peak Energy CEO, Colin Marshall, commented: “The combination of severe weather and weak rail service left us with lower shipments than we anticipated in the fourth quarter and full year. Despite the challenging external environment, our mines operated well, and we successfully contained controllable costs and reduced capital expenditures. As a result, we were still able to deliver Adjusted EBITDA in line with our third quarter guidance. We continued to incrementally expand our export sales into Asia, however, our 2013 results were impacted by lower international market prices. Nevertheless, we see positive fundamentals for pricing both domestically and internationally as supply and demand come back into balance.”

Health and safety

In 2013, the company suffered only nine reportable injuries, resulting in a 2013 Mine Safety and Health Administration (MSHA) All Injury Frequency Rate of 0.59, a 28% decrease from 2012.

The Spring Creek mine in Montana has no reportable injuries during the full year 2013, and has now operated 1.2 million work hours without a reportable injury.

In January this year, the Cordero Rojo mine also passed one million work hours without incurring a reportable injury. “It is great to have two mine operating injury free for over one million hours. This is no small achievement and reflects very well on the professionalism and dedication of all Cloud Peak Energy’s employees”, Marshall commented.

Owned and operated mines

Coal shipments from the company’s owned and operated mines in the fourth quarter were impacted by a severe weather storm in October as well as weak rail service throughout Q4. The lack of adequate rail service to both domestic utility customers and international logistics customers was attributed to competing demands for rail crews from increased crude oil and grain railings.

The company understands the railways are taking measures to improve service but that it will take some time to implement. An unusually wet summer, some production interruptions, and a series of operational issues at one of Cloud Peak’s long-term customers, resulted in the decrease in tons sold in 2013 compared to 2012.

Revenue from owned and operated mines decreased in 2013 due to a slightly lower average realized price per ton sold and fewer tons shipped. Spot prices were lower for indexed tons sold during 2013 as a result of the weak coal market conditions throughout the year.

Asian customers

Shipments exported to Asian customers increased in 2013 to 4.7 million t as Cloud Peak continued to work closely with the Westshore terminal to maximize vessel loadings and meet continuing strong demand from Asian customers.

Outlook

Throughout 2013, domestic coal market fundamentals improved, and Cloud Peak estimate that total US coal demand increased by approximately 35 million t compared to 2012. The increase reflects a switch back to coal-fired electricity generation as a result of higher natural gas prices. At the same time, two years of low coal prices have caused producers to cut capacity. Stockpiles of PRB coal are estimated to have fallen to 67 million t at the end of 2013 compared to 91 million t in 2012.

For 2014, Cloud Peak expects total US coal burn to be higher than 2013 levels.

Demand from Asia

Internationally, the company continues to see growing demand for PRB coal from its Asian customers. In 2013 the major increase in seaborne thermal coal demand was from India, supported by continued growth in Chinese imports.

“While Asian demand for coal continues to grow it is interesting to see demand from Japan increasing as they are building new high efficiency coal units. We are also seeing new coal plants being built in Korea and Taiwan as they prepare to meet their future electricity demand. Cloud Peak Energy’s Spring Creek coal is increasingly well regarded in the Asian marketplace and due to its consistent quality is now considered equivalent to the best Indonesian coal brand many of these new plants are designed to burn,” Marshall added.

2014/15 sales

For 2014, Cloud Peak has committed to sell 84 million t from its three owned and operated mines. For 2015, the company has currently committed to sell 47 million t from its three owned and operated mines.

Conclusion

“Our strategy is to match our production to the market demand. This has proved to be a sensible policy in recent years which has allowed us to control our costs and optimize our mine plans. We see several indicators that a healthier coal market is returning. We anticipate domestic and international coal pricing will recover and believe that Cloud Peak Energy is well positioned financially and operationally to benefit when they do,” Marshall concluded.

Edited from various sources by Katie Woodward

Read the article online at: https://www.worldcoal.com/coal/14022014/cloud_peak_energy_records_lower_q4_coal_shipments_517/