Consol Energy Inc.'s coal volumes out of its Baltimore terminal will likely remain restricted through May, in the wake of the March 26 Francis Scott Key bridge collapse, as the company works to offset the impacts on its export business.
The Pennsylvania-based coal producer lost the ability to ship coal from its Consol Marine Terminal when another company's cargo ship collided with the bridge over the Patapsco River. But officials are estimating that a permanent 700-foot-wide, 50-foot-draft shipping lane could be open by the end of May, Consol said in its earnings release.
While Consol said it has found alternatives for its coal, shipments are lagging behind production, leading to rising inventories at the company's terminal just as exports are becoming increasingly important to a US coal sector losing domestic customers. Plenty of markets abroad are beckoning for US coal, particularly customers in India.
"Our rail and logistics partners have stepped up and helped us quickly divert some of our export shipments to an alternative port in Virginia, where we secured some incremental capacity, which has allowed us to move approximately 50% of our planned export volumes," Consol CEO Jimmy Brock said on the company's May 7 earnings call.
"The good news is that we are still shipping tons into the export market thanks to the cooperation of our rail and logistics partners, which has helped us partially mitigate the financial impact of the bridge collapse on our business."
Given the timing of the collapse, much of its financial impact will be disclosed in the company's second-quarter earnings report. However, Robert Braithwaite, Consol's vice president of marketing and sales, said that sending coal from Consol's Pennsylvania mining complex to Norfolk instead of Baltimore costs the company approximately $10 more per short ton.
The company's Pennsylvania mining complex had an average cash cost of coal sold per ton of $40.29 in the first quarter, compared to $33.61 in the year-ago quarter. Consol expects that figure to be between $37.50 and $39.50 for the year. Consol's average cash margin per ton sold was $28.04 in the first quarter, compared to $50.71 a year ago.
Braithwaite estimated that moving the coal to Norfolk while the Baltimore port is closed results in an "opportunity loss" of roughly $14 million.
While the terminal access is closed, Consol has also accelerated its domestic shipments and worked to cut its expenditures. The company reduced its expectations for sales to a range of 24.0 million to 26.0 million short tons, from 25.0 million to 27 million short tons previously, due to the bridge collapse, Mitesh Thakkar, Consol president and CFO, said on the earnings call.
"Customer demand in the export markets has remained strong, and we have had constant communications with our customers to work through the delays and move shipments around," Brock said. "We have a plan to accelerate our summer maintenance work at the Consol Marine Terminal in conjunction with pre-shipping coal to the terminal to allow it to hit the ground running when the shipping lane opens."
The company began 2024 aiming to sell 50% of its Pennsylvania mining complex's coal to export markets, but has now bumped up that target to 60%, Thakkar said, despite the port closure in Baltimore. Thakkar added that the company is currently able to move about 600,000 to 800,000 short tons of coal to export markets per month, compared to a more typical rate of 1.2 million to 1.5 million short tons per month.
Brock added that the company has about 450,000 short tons of coal in inventory at its Baltimore terminal, "ready to go." Brock said the company's plan is to make up for delayed shipments starting in June and working through the first week of July, when its operations would have typically been shut down for maintenance.
"We haven't lost one vessel as we sit here today," Brock said. "Everything has been deferred, and we continue to get e-mails daily from our customers asking when this port is going to reopen because they want to get their vessels loaded ASAP."
Consol reported $101.9 million in net income in the first quarter, down 55.8% from $230.4 million in the year-ago period.
