The US coal industry is hunkering down as falling sales and revenues take an increasingly large bite out of bottom lines. The situation worsened earlier this year when the destruction of a bridge in the US East Coast port of Baltimore disrupted coal exports for a couple of months.
This event might have been the trigger for the latest merger in the struggling US coal industry between Arch Resources and CONSOL Energy Inc.
The $US5.2 billion, all-paper offer will create a company to be called Core Natural Resources—again, with no mention of coal anywhere near the letterhead.
CONSOL shareholders will own about 55% of the combined company. On a pro forma basis using 2023 data, the new company will have revenues of around $US5.7 billion and an adjusted EBITDA of approximately $US1.8 billion.
CONSOL shares were down 6% year-to-date, while Arch Resources shares were down 24%.
Earlier this year, CONSOL faced a significant threat to its operations after a catastrophic bridge collapse choked off Baltimore Harbour, curtailing shipping to the company’s export terminal a few miles away. CONSOL has focused on boosting overseas shipments in recent years amid shrinking domestic demand for coal. Baltimore’s port has since fully reopened.
The new company, Core Natural Resources, will be a leading producer and exporter of high-quality metallurgical (steelmaking) and high calorific value thermal coals.
It will have mining operations and terminal facilities across six US states, owning 11 mines, including one of the largest, lowest-cost, and highest-calorific-value thermal coal mining complexes in North America, as well as one of the largest, lowest-cost, and highest-quality metallurgical coal mine portfolios in the US.
Additionally, the combined company will have access to global markets through ownership interests in two export terminals on the US Eastern Seaboard. The two companies’ coal sales in 2023 totalled 101 million tonnes.
In terms of market value at the outset, the new company will be nearly twice the size of Peabody ($US2.96 billion), but in terms of coal produced, it and Peabody will be neck and neck with around 101 million tonnes each from their US mines.