Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Warrior Met Coal Inc (HCC, Financial) produced the first development tons from the Blue Creek growth project on time and within budget.
- The company is strategically managing spot opportunities and exercising patience with certain geographies to optimize market conditions.
- Despite weak global demand, Warrior Met Coal Inc (HCC) achieved a consolidated gross price realization of 93% in the third quarter.
- The Blue Creek project is progressing well, with significant advancements in infrastructure and development, remaining on schedule for completion.
- Warrior Met Coal Inc (HCC) maintains a strong liquidity position with $746 million available, ensuring the ability to complete the Blue Creek project within budget.
Negative Points
- Global steel prices have been under pressure due to excess Chinese steel exports and weak demand, impacting Warrior Met Coal Inc (HCC)'s markets.
- The third quarter sales volume decreased by 17.5% compared to the same quarter last year, reflecting weaker market conditions.
- The company experienced a 7% lower average net selling price, reducing cash margin per ton to $48 from $70 in the previous year.
- Warrior Met Coal Inc (HCC) reported a decrease in net income and adjusted EBITDA compared to the same quarter last year, driven by lower sales volume and pricing.
- The current pricing environment for steelmaking coal is not sustainable for extended periods, with some producers experiencing realizations below total cash costs.
Q & A Highlights
Q: Could you comment on the Q4 outlook in terms of spot pricing and competitive dynamics in Asia?
A: We are carefully monitoring the market, especially in Asia, where most spot sales are CFR. While we could move more tons, we are cautious about when and where to commit, ensuring we protect our assets and coal quality until the market recognizes their value. Term business in Asia, outside of Japan, is difficult to secure at reasonable pricing.
Q: Is the 90% realization in Q3 versus PLV a reasonable assumption for Q4?
A: Be cautious with the 93% realization figure as it reflects a falling market. If the market stays flat, the realization might be slightly lower. If the market rises, the realization could drop more significantly due to the one-month lag in pricing.
Q: Could Q4 shipments be down sequentially if demand doesn't improve?
A: We do not anticipate a decrease in Q4 shipments. Despite fewer operating days, our expectations align with the midpoint of our full-year guidance.
Q: Are you already in conversations with customers about Blue Creek volume for next year?
A: Yes, we are in discussions with customers. The expectation is to contract the volume, although initial shipments will allow customers to test the coal in their coke ovens.
Q: How many more people do you need to hire for Blue Creek next year, and will this impact costs?
A: We anticipate hiring around 100 more people, but this is still being finalized in our budgeting process. This hiring will not impact costs until we start selling the coal, as it will be allocated to mine development.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
