News Archive

Google, Facebook show power of ad duopoly as rivals stumble

SAN FRANCISCO (Reuters) – Quarterly results from Alphabet Inc (GOOGL.O) and Facebook Inc (FB.O) provided fresh evidence this week that the digital advertising market is effectively a duopoly, a dynamic with deep implications for two of Silicon Valley’s titans.

Alphabet, the owner of Google and YouTube, and Facebook, the world’s largest social network, each produced billions in profits during the most recent quarter and enjoyed steep revenue increases, while smaller rivals such as Snap Inc (SNAP.N) and Twitter Inc (TWTR.N) struggle to maintain growth and reduce losses.

This year, the Big Two in internet advertising are expected to take half of all revenue worldwide, and more than 60 percent in the United States, according to research firm eMarketer.

In the U.S. market, no other digital ad platform has market share above 5 percent.

Google suffered a minor blip in earnings due to higher payments to mobile carriers and others for search traffic. But efforts by Verizon and other network operators to compete for mobile ad dollars have had little impact thus far.

Independent advertising technology companies such as Rubicon Project (RUBI.N) and Rocket Fuel (FUEL.O) have also found it tough to compete.

Advertisers are flocking to Facebook and Google because they reach billions of people and have a wealth of data that can be deployed for targeted marketing.

Their growing dominance, however, raises questions about how they will use their billions in profits to maintain growth when the advertising market as a whole is expanding only modestly.

“Digital advertising will soon be approaching a point of saturation, indicating that there are limits to growth which may not be fully accounted for by the investment community,” Brian Wieser, senior analyst at Pivotal Research, said in a client note this week.

The advent of a duopoly is also spurring concerns about monopolistic practices. Google this month set aside $2.7 billion to pay a record European Union antitrust fine for favoring its shopping service in search results, and it faces two additional investigations in Europe.

Facebook declined to comment on Friday. In the past, the company has rejected the idea that it is part of a duopoly, saying that it competes against more than just digital platforms and has less than 5 percent of the overall advertising market. Alphabet did not reply to requests for comment.

Video Gold

Video is one market that Facebook and Google both view as a crucial new frontier. With huge investments planned, the companies are preparing to do to the television advertising business what they have long since done to traditional print advertising: namely, take much of it for themselves.

YouTube has been rolling out new series with stars such as Ellen DeGeneres and Kevin Hart, and says that the service’s overall 1.5 billion viewers watch, on average, 60 minutes a day on their phones and tablets.

Facebook is expected to launch original video series of its own within weeks, after signing deals with companies such as Vox Media and BuzzFeed. Facebook’s Instagram unit is also becoming a bigger producer of revenue, with video likely to be a big part of the mix.

Already, many advertisers feel they cannot ignore the massive reach of YouTube. Some big advertisers launched a boycott of YouTube this year after their ads appeared alongside videos from Islamic extremists, yet there was no evidence from Alphabet’s earnings report on Monday that it had any impact on revenues.

“Marketers aren’t going to get fired for hiring Facebook and Google,” said Harry Kargman, chief executive of Kargo, which manages digital marketing for media companies including Time Inc (TIME.N).

Antitrust Risk

Other owners of digital ad inventory are feeling the squeeze. This month, an alliance of U.S. news organizations started a lobbying campaign for an exemption from antitrust law that would allow them to coordinate their negotiations with Google and Facebook, although such requests from other industries generally have not succeeded.

Consumer advocates worry about the giants snuffing out competition.

“All of the major technology companies should be on alert that people are a bit spooked and unsettled about their size and their ability to expand into new markets,” said Gene Kimmelman, president of Public Knowledge, a nonprofit that advocates for an open internet.

Size is not by itself an antitrust concern, and neither is the ability to quash competitors, even through copying as Facebook has done with rival app Snapchat. Facebook and Google are not under U.S. antitrust investigation.

Still, the prospect of a future probe could still affect their business strategies.

“As long as they toe the line and stay in the market position they’re in, it’s going to be kind of hard to go after them under the existing antitrust laws,” said Herbert Hovenkamp, a University of Pennsylvania professor of antitrust law.

But acquisitions, he said, would be another matter.

“Even a merger between Facebook or Google and a smaller rival would probably be looked at very closely,” Hovenkamp said.

Reporting by David Ingram; Editing by Jonathan Weber and Nick Zieminski

Article source:

Airlines’ Atlantic pact guards against budget rivals and Brexit

BERLIN/NEW YORK (Reuters) – A transatlantic alliance between three global airlines will shore up their position in the lucrative UK-U.S. market, shielding them from low-cost rivals and the uncertainties of Britain’s exit from the European Union.

Delta Air Lines (DAL.N), Air France-KLM (AIRF.PA) and Virgin Atlantic [VA.UL] have announced plans for a 15-year partnership on routes between Europe and the United States and equity deals which will see them take stakes in each other.

The joint venture, announced on Thursday, will see the three carriers share their profits on transatlantic routes. It will give Air France-KLM greater access to the Britain-U.S. market – among the most profitable – while the Franco-Dutch group’s short-haul European flights could bring more customers to Virgin’s U.S.-bound flights from London.

The ability to offer customers a host of extra flights could give U.S. carrier Delta an edge against domestic rivals including American Airlines (AAL.O) and United Airlines (UAL.N).

The new alliance also provides the partners with a hedge against Brexit in the business travelers market, should Britain’s EU departure lead to companies moving to the continent, and a consequent drop in air traffic from London.

Global banks have already said they could move thousands of jobs out of Britain to prepare for Brexit, while two major EU regulators are seeking new homes.

“This is a play on Delta’s part to protect itself as Brexit unwinds should London lose traffic,” said Atmosphere Research Group analyst Henry Harteveldt.

The partnership, expected to come into effect in 2018, will also strengthen the three big players’ positions, at a time when low-cost entrants Norwegian Air Shuttle (NWC.OL) and Wow Air are shaking up the U.S.-Europe market – though their share of flights remains small.

It will also allow for better use of the airlines’ London Heathrow slots, analysts said, allowing them to free up extra short-haul capacity and move it to long-haul routes.

‘Skin in the Game’

The partnership, which is subject to regulatory approval, would combine two existing and overlapping transatlantic joint-ventures, supported by equity deals worth $1 billion.

Willie Walsh, CEO of rival airline group IAG (ICAG.L), said Air France-KLM’s investment in Virgin Atlantic – it plans to take a 31 percent stake – could give it a bigger say in how Britain’s aviation landscape looks post-Brexit.

“It probably represents a positive in terms of the Air France position in what the rules should be after Brexit … they have skin in the game,” he told analysts on Friday.

Most of the transatlantic market is controlled by joint ventures involving global airline heavyweights.

The new alliance would have about a 27 percent share of transatlantic flights, ahead of the 24 and 22 percent for the other two rival groupings. See graphic:

Walsh declined to comment further on what the impact would be on IAG’s own transatlantic partnership with American Airlines. He said, however, he remained positive on the outlook for the transatlantic market despite the recent increased competition.

It is not known which ownership rules will apply after Brexit, and whether Britain will remain part of the single European aviation market or the EU-U.S. Open Skies pact and analysts expect carriers to look for creative solutions.

Air France-KLM said on Friday that it had agreed an insurance plan for ownership of Virgin Atlantic, which would see Virgin Group, whose stake is due to drop to 20 percent, regaining a majority share should the carrier need to be UK-owned after Brexit.

“In terms of influence in the important Heathrow and North Atlantic market this ticks all the boxes, and with (Virgin Group boss) Richard Branson moving to a minority position it will allow potentially a realignment of usage of Virgin’s Heathrow slot portfolio,” consultant John Strickland said.

Additional reporting by Alistair Smout in London and Cyril Altmeyer in Paris; Editing by Pravin Char

Article source:

Deutsche Boerse’s Kengeter in close contact with LSE in run-up to merger talks: Der Spiegel

FRANKFURT (Reuters) – Deutsche Boerse’s (DB1Gn.DE) Chief Executive Carsten Kengeter, who is under investigation for insider trading, frequently met and spoke by telephone with his London Stock Exchange counterpart in the months before they announced official merger talks, Der Spiegel magazine reported on Friday.

Frankfurt’s public prosecutor has been investigating Kengeter for possible insider trading for the purchase in December 2015 of 4.5 million euros ($5.3 mln) in Deutsche Boerse shares, two months before the two exchange operators announced merger negotiations.

Kengeter has denied all allegations of wrongdoing, saying the shares he purchased were part of an official Deutsche Boerse compensation plan. “Insider trading goes against everything I stand for,” he told shareholders in May.

Der Spiegel said that Kengeter and LSE (LSE.L) CEO Xavier Rolet met or telephoned almost weekly in the second half of 2015, from the moment that Kengeter assumed the helm of Deutsche Boerse in June 2015.

A report from German market watchdog BaFin shows that between June 2015 and January 2016 Rolet’s calendar showed the two had 15 conversations, while Deutsche Boerse disclosed four appointments between the two, Der Spiegel said.

The BaFin report of the 15 meetings came from information it received from the British market watchdog, which had access to Rolet’s calendar, according to Der Spiegel.

Representatives for BaFin and its British counterpart FCA declined to comment.

A spokesman for Deutsche Boerse said, “From the beginning of the investigation, we said we were cooperating with the authorities.”

A spokesman for LSE declined to comment immediately.

($1 = 0.8508 euros)

Reporting by Tom Sims and Alexander Huebner in Frankfurt and Huw Jones in London; Editing by Susan Fenton

Article source:

Kors needs to buckle down for Jimmy Choo deal to shine

(Reuters) – U.S. retailer Michael Kors (KORS.N) is betting that its acquisition of storied shoemaker Jimmy Choo will give sales a much-needed boost, but lingering problems at Kors’ core bag business could delay potential benefits.

Kors said earlier this week it would buy Jimmy Choo for $1.2 billion and plans to expand the line by opening more stores, especially in Asia.

Jimmy Choo, whose towering stilettos were made famous by characters in the popular TV series “Sex and the City,” is synonymous with affluence, and somewhat at odds with Kors’ image of accessible luxury.

It could be argued that Jimmy Choo will give Kors’s tumbling sales and stock a leg up, but experts said Kors’ expansion plans could dilute the shoemaker’s brandname.

“Revenue expansion doesn’t come from opening stores today, but figuring out how to unlock the e-commerce component and (Kors) haven’t proven that they get that either,” said Eric Schiffer, CEO of private equity firm Patriarch Organization.

Kors has made this mistake before.

Once a seller of popular Mercer and Hamilton handbags, Kors put its wares too quickly on too many shelves, making them ubiquitous.

Since then, the company has struggled to come up with designs that have caught the fancy of the well-heeled buyer, who have gravitated toward bags offered by Coach Inc (COH.N) and Tory Burch.

Kors’ has been trying to stem the sales declines by expanding into dresses, menswear and online, but has had little success.

“If (Kors) had fixed their U.S. market, if they’d shown improvements there and then made this acquisition, people would be a lot more comfortable with it,” said Gabriella Santaniello, analyst at A-Line partners.

“For (Jimmy Choo), I could see them opening in another market but I think that is what makes everyone nervous. It is like: “Look what they did with the Michael Kors brand, are they going to do that to Jimmy Choo?”

Multibrand Strategy

Kors’ rival Coach Inc (COH.N) faced similar problems not so long ago.

But Coach responded quickly, by tightening supplies to department stores to regain its luxury cachet, before diversifying with the buyout of upscale shoemaker Stuart Weitzman in 2015.

The company recently bought smaller rival Kate Spade, whose products are a hit with millennials.

Both retailers seem to be looking to emulate the successful multibrand strategy employed by European companies LVMH (LVMH.PA) and Kering SA (PRTP.PA), where cash flows from one large brand are reinvested into smaller but faster growing ones.

These two companies have grown into luxury powerhouses by buying multiple luxury brands such as Christian Dior, Tag Heuer, Gucci, and Alexander McQueen.

Kors’ CEO John Idol said the company would look to grow by buying more globally recognized luxury brands like Jimmy Choo.

“… we are really looking to build an international luxury company and less so brands that … have a greater reliance on wholesale than its own retail strategy,” he said on a conference call on Tuesday.

Idol said Jimmy Choo would be run independently with minimal interference from Kors’ management and that he doesn’t want the two brands to be linked with each other.

But analysts said while this could be the right approach for Coach, which has a creative, forward-thinking team, it could overwhelm Kors, at least initially.

Kors will need to have a deep understanding of demand, it will have to innovate to drive excitement, maintain the trueness of the brands it acquires, and little or no overlap with other brands in its portfolio, said Jason Green, CEO of customer strategy firm Cambridge Group.

For now at least, analysts said, Kors should be looking to walk before it runs.

Reporting by Gayathree Ganesan and Siddharth Cavale in Bengaluru; Editing by Sayantani Ghosh

Article source:

Starbucks shares tumble on fears of slowing U.S. growth

(Reuters) – Starbucks Corp’s (SBUX.O) shares were on track for their worst one-day decline in five years on Friday as the coffee chain’s latest quarterly report triggered concerns of a slowdown in sales in the United States, its biggest market.

While Starbucks’ profit met Wall Street expectations in its first quarter under new CEO Kevin Johnson, the results suggested that growth in the coffee chain’s member loyalty program was slowing, a trend that could impact future sales.

Starbucks’ U.S. rewards membership rose 8 percent in the quarter ended July 2 – a rate that lags the 18 percent increase seen a year earlier and slower than the previous quarter’s 11 percent rise.

“Customers were choosing to spend their money elsewhere, Johnson told CNBC on Friday, calling it a “short-term phenomenon.”

But analysts said the slowdown was a direct result of changes Starbucks made to its rewards program, that, while benefiting the company, left many customers unwilling to sign up.

Starbucks last year tweaked the program to award customers points for every dollar spent at its cafes, a departure from its practice of giving points for every purchase, putting customers buying cheaper items at a disadvantage.

The slowdown in the loyalty program adds to concerns about Starbucks’ U.S. business that is already struggling in the face of mounting competition from restaurants, meal kit sellers and convenience stores.

“With (loyalty) growth continuing to slow, we fear U.S. same store sales are unlikely to maintain the mid-single digit range that the market has come to expect,” Credit Suisse analysts said in a report.

Sales at Starbucks’ mainstay U.S. cafes open at least 13 months rose 5 percent in the latest quarter.

Analysts cast doubts about the Seattle-based company’s ability to meet its long-term earnings and revenue targets after Starbucks also trimmed its current-quarter earnings forecast on Thursday.

Starbucks has said it expects to grow earnings by 15 percent to 20 percent and revenue in the double percentage digits over the long term.

Those targets “may no longer be realistic,” analysts at Wedbush Securities said, pointing to several quarters of underperformance and the lack of “a clear path” to same-store sales re-acceleration.

Eight analysts lowered their 12-month targets on Starbucks’ share price to as low as $56. The median price target is $66.

Starbucks’ shares were down 8.3 percent at $54.55 and the company was on course to shed about $7 billion in market value.

Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Sai Sachin Ravikumar

Article source:

Wall Street braces for end of Snap share lockup

SAN FRANCISCO (Reuters) – A flood of Snap Inc shares held back since the Snapchat owner’s initial public offering could start to trade freely next week, pressuring a stock that has already plunged far below its debut price.

Starting on Monday and extending into August, early investors, employees and other insiders at the Snapchat owner can sell shares for the first time since its $3.4 billion March IPO, the third-largest ever for a U.S. tech company.

That means the supply of stock on the public market could mushroom in a matter of weeks by hundreds of millions of shares from fewer than 200 million shares.

Demand for Snap shares among investors is already meager after the stock hit five straight record lows this week.

It has sunk nearly 20 percent below its $17 IPO price and is down roughly 50 percent from a record high reached shortly after its debut, dragged lower by investor concerns about user growth and waning confidence in its ability to eventually turn a profit.

“You don’t want to be caught in this wave of transactions that will impact the stock in some way,” said Philippe Collard, founder of Yabusame Partners, a management consulting firm specializing in the technology industry.

There is one corner of the market that does have use for the stock, as bets against Snap have become so popular that shares available for short selling are hard to come by.

Any shares sold by Snap insiders and employees would add to the supply and could fuel more short selling.

Snap also reports quarterly results on Aug. 10, another potential source of pressure. Its disappointing debut earnings in May prompted a 20 percent one-day nosedive in the stock.

“There’s likely to be a lot of caution and concern related to what the company will report and communicate,” said CFRA analyst Scott Kessler. “The company is taking some hits, starting to take on water.”

Snapchat is wildly popular with users under 30, but many on Wall Street are critical of its slowing growth. Snap has warned it may never be profitable, and Facebook Inc’s Instagram has been rolling out features that copy Snapchat.

Selling Pressure

On July 31, early investors including Lightspeed Venture Partners will be able to sell up to 400 million shares, with employees owning another 782 million allowed to start selling on Aug. 14, four days after Snap reports results, JPMorgan analyst Doug Anmuth said in a recent note.

Those shares include more than 400 million shares owned by Chief Executive Evan Spiegel and co-founder Robert Murphy. They and other senior executives are subject to additional rules restricting how many shares they can sell each quarter.

Apart from those limits, 97 percent of Snap will be potentially available on the stock market by the end of August, up from just 13 percent now, according to Anmuth.

S3 Partners, a financial analytics firm, believes early investors could sell up to 120 million shares starting on July 31, increasing the supply for short sellers who are currently paying annualized interest rates of more than 60 percent to borrow the stock.

“The stock borrow rates will plummet very quickly,” said Ihor Dusaniwsky, S3 Partners’ head of research. “You’ve got a lot of short sellers that didn’t like the trade at a 50 percent fee, but love it at a 5 percent fee.”

To be sure, the expiry of insider trading restrictions does not always hurt share prices in the short term.

Twitter Inc shares dropped 18 percent on the day of a key lockup expiry in May 2014. In November 2012, Facebook Inc jumped 13 percent the day of a lockup expiry after its IPO.

But experts said lockup expiries tend to hurt companies already on weak footing.

Following its recent share price decline, Snap is valued at 16 times expected revenue, still expensive compared to Facebook at 12 times revenue, according to Thomson Reuters data.

The AdvisorShares Ranger Equity Bear exchange-traded fund shorted Snap after its IPO, and portfolio manager Brad Lamensdorf said he may to do it again if an increased share supply makes borrowing the stock cheaper.

“If it’s a really weak story and it’s going down, the lockup is going to provide a catalyst for it to go down faster,” Lamensdorf said.

Reporting by Noel Randewich; Editing by Meredith Mazzilli

Article source:

Amazon’s big profit miss spooks investors, but analysts stay bullish

(Reuters) – A steeper-than-expected drop in quarterly profit rattled some (AMZN.O) investors, but Wall Street analysts remained largely bullish about the company’s aggressive spending plans.

Shares of the e-commerce juggernaut, which have risen 40 percent this year, were down 4.3 percent at $1,001 in early trading on Friday, wiping out $21 billion from its market value.

The stock touched a record high on Thursday, helping CEO Jeff Bezos briefly unseat Microsoft Inc (MSFT.O) co-founder Bill Gates as the world’s richest person.

“The overall story coming out of Amazon’s second quarter print feels a lot like it did three months ago — accelerating growth, stepped-up investments, lower near-term profitability,” J.P. Morgan analyst Doug Anmuth said.

“But will anyone care about profit when Amazon is taking bigger chunks of market share?”

The world’s largest online retailer reported a better-than-expected rise in revenue, but operating profit came in well short of analysts’ estimate as the company continued to pump in money to expand in international markets such as India.

The company also guided to a possible operating loss for the current quarter.

Amazon, which started as an online bookseller, has forayed into areas that historically had barriers to e-commerce. The company’s recent $13.7 billion acquisition of Whole Foods Markets Inc (WFM.O) is testimony to Bezos’ far-reaching ambition.

At least four brokerages, including J.P. Morgan, raised their price targets on the stock.

Morgan Stanley, however, trimmed its price target by $50 to $1,150 based on valuation. The median price target is $1,150, indicating a 9.9 percent upside to Thursday’s close.

Amazon currently trades 115.8 times its 12-months forward earnings. This compares with Microsoft’s 22.43 and Alphabet Inc’s (GOOGL.O) 26.45. The two compete with Amazon’s market leading cloud computing business, Amazon Web Services (AWS).

PE is widely used on Wall Street to gauge the relative value of stocks although it is not the only such metric.

AWS continued to be the company’s cash cow, bringing in $4.1 billion in sales, a 42 percent jump.

Chief Financial Officer Brian Olsavsky said on a post-earnings call that the AWS unit would expand in France, Sweden and China in the near future.

“We believe the company’s ongoing heavy investments in fulfillment capacity, video content, and AWS are to match with its substantial growth rates, and should not be viewed negatively,” Needham Co analyst Kerry Rice said, who views the pullback in the stock as a “buying opportunity.”

(This version of the story has been refiled to remove apostrophe from headline)

Reporting by Sweta Singh and Ankur Banerjee in Bengaluru; Editing by Sriraj Kalluvila

Article source:

Chevron swings to quarterly profit as costs drop

(Reuters) – Chevron Corp (CVX.N) swung to a quarterly profit on Friday, helped largely by resurgence in oil and gas production as prices jumped and costs slipped.

Projects that Chevron had been building for years have started to come online and allowed Chevron to progress from spending on construction to marketing and sales. With oil prices inching higher, that also boosted the company’s profit.

“We’re delivering higher production with lower capital and operating expenditures,” Chief Executive John Watson said in a statement.

The company reported a second-quarter net income of $1.45 billion, or 77 cents per share, compared to a net loss of $1.47 billion, or 78 cents per share, in the year-ago quarter.

Excluding one-time items, the company earned 91 cents per share. By that measure, analysts expected earnings of 87 cents per share, according to Thomson Reuters I/B/E/S.

Production surged 10 percent to 2.89 million barrels of oil equivalent per day.

Shares of San Ramon, California-based Chevron were down slightly in premarket trading, shedding 0.1 percent to $106.

Rival Exxon Mobil Corp (XOM.N) reported a lower-than-expected quarterly profit earlier on Friday.

Reporting by Ernest Scheyder; Editing by Bernadette Baum

Article source:

U.S. coal exports soar, in boost to Trump energy agenda, data shows

WASHINGTON/LONDON (Reuters) – U.S. coal exports have jumped more than 60 percent this year due to soaring demand from Europe and Asia, according to a Reuters review of government data, allowing President Donald Trump’s administration to claim that efforts to revive the battered industry are working.

The increased shipments came as the European Union and other U.S. allies heaped criticism on the Trump administration for its rejection of the Paris Climate Accord, a deal agreed by nearly 200 countries to cut carbon emissions from the burning of fossil fuels like coal.

The previously unpublished figures provided to Reuters by the U.S. Energy Information Administration showed exports of the fuel from January through May totaled 36.79 million tons, up 60.3 percent from 22.94 million tons in the same period in 2016. While reflecting a bounce from 2016, the shipments remained well-below volumes recorded in equivalent periods the previous five years.

They included a surge to several European countries during the 2017 period, including a 175 percent increase in shipments to the United Kingdom, and a doubling to France – which had suffered a series of nuclear power plant outages that required it and regional neighbors to rely more heavily on coal.

“If Europe wants to lecture Trump on climate then EU member states need transition plans to phase out polluting coal,” said Laurence Watson, a data scientist working on coal at independent think tank Carbon Tracker Initiative in London.

Nicole Bockstaller, a spokeswoman at the EU Commission’s Energy and Climate Action department, said that the EU’s coal imports have generally been on a downward trend since 2006, albeit with seasonable variations like high demand during cold snaps in the winter.

Overall exports to European nations totaled 16 million tons in the first five months of this year, up from 10.5 million in the same period last year, according to the figures. Exports to Asia meanwhile, totaled 12.3 million tons, compared to 6.2 million tons in the year-earlier period.

For a graphic on U.S. coal exports, click here

Trump had campaigned on a promise to “cancel” the Paris deal and sweep away Obama-era environmental regulations to help coal miners, whose output last year sank to the lowest level since 1978. The industry has been battered for years by surging supplies of cheaper natural gas, brought on by better drilling technologies, and increased use of natural gas to fuel power plants.

His administration has since sought to kill scores of pending regulations he said threatened industries like coal mining, and reversed a ban on new coal leasing on federal lands.

Taking Credit

Both the coal industry and the Trump administration said the rising exports of both steam coal, used to generate electricity, and metallurgical coal, used in heavy industry, were evidence that Trump’s agenda was having a positive impact.

“Simply to know that coal no longer has to fight the government – that has to have some effect on investment decisions and in the outlook by companies, producers and utilities that use coal,” said Luke Popovich, a spokesman for the National Mining Association.

Shaylyn Hynes, a spokeswoman at the U.S. Energy Department, said: “These numbers clearly show that the Trump Administration’s policies are helping to revive an industry that was the target of costly and job killing overregulation from Washington for far too long.”

Efforts to obtain comment from exporters Arch Coal and privately held Murray Energy Corp were unsuccessful. Contura Energy, which emerged as part of Alpha Natural Resource’s bankruptcy and restructuring, and filed for public offering in May, declined to comment.

A spokesman for Peabody Energy, the largest coal producer, though without a major export profile, said the United States was generally a “swing supplier of seaborne coal.”

U.S. Energy Information Administration analyst Elias Johnson said the U.S. coal industry may now be better positioned to meet foreign demand because U.S. miners have learned to produce at lower cost, after coming through a series of recent bankruptcies.

“There’s the possibility that the U.S. will become more of a primary player in the global coal trade market,” he said.

But he added there are also plenty of reasons the spike in demand could be temporary. For one thing, U.S. coal production and transportation costs are much higher than for other producers such as Indonesia and Australia.

Because coal can often be transhipped from European ports before it is consumed, it is also hard to determine where shipments ultimately end up.

Johnson pointed out that some of the fuel shipped into Western Europe, for example, could be making its way to other places like Ukraine, which is having trouble securing coal from its separatist-held regions.

Trump said last month that his administration is offering more coal to Ukraine, but it was unclear how, given deals are typically worked out between companies.

Editing by Richard Valdmanis and Alden Bentley

Article source: