U.S. coal producers have booked much of their 2023 sales thanks to solid domestic and export demand.

Higher overseas sales, in part due to countries scrambling to replace Russian supplies in the wake of the country's invasion of Ukraine, created opportunities to move coal abroad in 2022, publicly traded coal companies reported during discussions of the final quarter of 2022. In addition, many coal company executives said they expect strong sales to continue as they look out to the 2024 sales book and beyond, even as coal-fired power plant retirements in the U.S. limit their local customer base. Seaborne thermal coal prices have tempered in recent months but remain above historical averages, providing a boon to miners with high-quality coal and easy access to export facilities.

Strong sales and high prices have enabled some companies to log record earnings. Share prices for most U.S. coal miners increased dramatically throughout 2022, with stocks more than tripling for many of the largest publicly traded coal miners based in the country. Prices for Peabody Energy Corp. and Alpha Metallurgical Resources Inc. stocks increased more than 1,000% each through the year.

"They're generating returns right now that amount to a windfall, something they didn't expect," said Steve Piper, director of energy research for S&P Global Commodity Insights. "The [long-term] future doesn't look so bright, so they are thinking about how do they rightsize their production with what the future market and reduced [U.S. sales volume] market looks like."

Already, coal companies are filling up order books for 2023 and beyond.

As of its Jan. 30 earnings call, Alliance Resource Partners LP priced and committed 94% of the coal it expects to sell in 2023. The company's midrange production guidance of 37 million tons for the year includes 3.3 Mt committed to export markets, and it expects to sell half of the 2.3 Mt of unsold annual production into export markets.

"Internationally, a number of factors are impacting global energy trade routes and, in our view, will continue to drive higher demand and pricing in the back half of 2023 and for several years to come, if not permanently," Joseph Craft, Alliance's chairman, president and CEO, said during the call. "Our primary trading partners for thermal coal in Europe are faced with the consequences of losing roughly 40 million tons per year of Russian coal imports for power generation, which resulted in skyrocketing prices in 2022."

Pennsylvania-based coal producer Consol Energy Inc. is also taking advantage of the ability to sell coal into overseas markets. The company has filled most of its sales book for 2023 and has a "very solid contracted position" for its 2024 coal sales, CEO Jimmy Brock said during a Feb. 7 earnings call. Brock added that, despite recent price volatility, Consol's sales team secured 23.9 Mt worth of contracts for 2023 and 12.5 Mt for 2024. The company sells coal of relatively high energy, or British thermal unit content, which makes it easier to transport over long distances.

"Fundamentally, we believe that the supply of high-Btu coal is still constrained, and the demand for our product remains strong for the foreseeable future," Brock said.

Alpha Metallurgical Resources, which primarily produces coal for steelmaking customers, shipped 16.4 Mt of the commodity to customers in 26 countries in 2022, CEO Andy Eidson said on a Feb. 23 earnings call. That led to record adjusted EBITDA of $1.7 billion for the company, allowing it to pay off its long-term debt load and brace for the future.

"Due to sustained global metallurgical coal supply tightness, coal markets are continuing to show strength with the key U.S. East Coast indices we follow, moving upward over the last few weeks and the Australian [premium low-vol coal index] is approaching $400 again," Eidson said during the call. "Together with the positive rail performance we've been experiencing recently, the foundation for a very good year seems to be in place."

Arch Resources Inc. has engaged in what it calls a "harvest strategy," COO John Drexler said on a Feb. 16 earnings call. That means the company generates cash from its Western U.S. thermal coal operations, which primarily sells to power generators in the country, when the market is favorable. Arch Resources is planning for a long-term wind-down of those operations given a dwindling local customer base. Still, the segment has generated nearly $1.3 billion in EBITDA over the past 25 quarters while eating up just $138.6 million in capital.

However, the ongoing challenge of rail disruptions continues to limit coal flow inside and outside of the U.S. The issue was particularly challenging for Western U.S. coal mines, which predominantly produce coal for the domestic power generation market.

Arch Resources, which reported strength in its metallurgical coal-focused operations in the Eastern U.S., said its legacy thermal coal segment saw results weakened considerably due to poor rail service in the fourth quarter of 2022. As a result, the company undershot customers' needs for coal and sales volumes, and production from its legacy thermal coal operations declined by 2.3 Mt.

"The coal industry is dependent on rail service to execute on our plans," Drexler said. "The poor rail performance over the last year in the West has been an extreme disappointment and dampened our results. We've continued to work with the railroads closely, and it will be important that they succeed in addressing their challenges in order for us to fully execute on our plan for our thermal segment in 2023."

Peabody Energy reported similar challenges at its Western U.S. coal operations. As a result, the company has "essentially sold out at all of our U.S. domestic operations for 2023," James Grech, president and CEO, said during a Feb. 14 earnings call. However, the ability to make those shipments depends on the railroads' promises to improve service.

"We had two cold snaps in December. During the first one, our [Powder River Basin] operations only had eight or nine trains a day versus the planned 18," Grech said. "During the second cold snap, we only had one train a day when 18 were planned."

S&P Global Commodity Insights produces content for distribution on S&P Capital IQ Pro.