Illinois Basin - Market Cycles and Outlook.ppt [Read-Only]thecoalinstitute.org/ckfinder/userfiles/files/Illinois Basin - Market Cycles and...Illinois Basin – Market Cycles and Outlook

Illinois Basin –Market Cycles and Outlook

The Coal Institute 2015 Fall Education & Engineering Seminar October 21-23, 2015Mid-Pines Resort in Southern Pines, NC

John T. HanouPresident, Hanou Energy Consulting, LLC

Hanou Energy Consulting, LLC 1

The following presentation has been derived from Hanou Energy’s:

• Illinois Basin Coal Supply, Demand & Price Trends 2015-2034

• Powder River Basin Coal Supply, Demand & Price Trends 2015-2034

• Original research

Inquire for details




Illinois Basin Market Trends












Other Observations• Oil prices:

• After artificially being propped up for years and years, oil prices are now priced under international supply/demand curves• High cost producers are on the bubble – Canadian tar sands,

conventional U.S. oil production, for instance

• Natural Gas Prices:• Thanks to shale fracking, the U.S. is blessed with abundant natural

gas supplies (oil, too!)• The U.S. is 10 years ahead of the rest of the world• Like oil, high cost producers are on the bubble – conventional U.S. gas

production from the Gulf, etc.• Hanou Energy expects volatile natural gas prices developing after the

current glut is absorbed - Just like the coal business!!!

• Coal Prices:• Hanou Energy expects coal prices will continue to be volatile!


Takeaways• Long term price history shows the market is highly cyclical

• Mainly driven by met coal demand for steel production• Upswings and downswings generally occur in ~15 year cycles

• During the long term cycles, short term coal prices are highly volatile and cyclical, too.• Domestic U.S. prices cycle in 2.5-3.5 year increments • Seaborne prices at ~3-4 year cycles • Prices are volatile due to short-term market conditions• Domestic U.S. and international price cycles are related but not necessarily so

• U.S. prices are closely tied to stockpile levels and natural gas prices and to some extent the seaborne market. • Recent international prices swings are tied to Pac Rim demand growth/decline and natural disasters (earthquakes, floods, etc.)

• The U.S. is and will continue to be a swing supplier in the seaborne market• CAPP production past its peak and high cost• Illinois Basin and NAPP has substantial new low cost production…but higher in sulfur

• History repeats itself• While current short term prices are low, the long term price upswing is only 10 years long…will it continue to the 15 year

average? • Will demand growth continue in Pac Rim?• China has screwed everything up!! Imports are 200Mt less than previous year.• The downturn today is eerily similar to that of early 1980s…i.e. overbuilding

• Future cycles can be predicted• Study the drivers and history - Both long term and short term

• Can U.S coal companies survive lower prices? • Maybe not:

• Higher priced contracts signed ~5 years ago are expiring and being renewed at much lower realizations• Bankruptcies and production cutbacks are occurring on a regular basis• M&A activity has been high and will likely continue.• More cutbacks (coal and transportation) are expected.• These cutbacks will create the next price spike!


Finis The future belongs to the low cost producer!

Contact Information:

John T. HanouPresident

Hanou Energy Consulting, LLC667 Shore Road

Severna Park, MD 21146

Cell: (410) 279-3818Fax: (410) 216-9229

Email: [email protected]

Web Site: www.hanouenergy.com


Illinois Basin - Market Cycles and Outlook.ppt [Read-Only]thecoalinstitute.org/ckfinder/userfiles/files/Illinois Basin - Market Cycles and...Illinois Basin – Market Cycles and Outlook

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