Cloud Peak Stock Price Drops Amid Fears Of Trade Retaliation

Apr 28, 2017
Originally published on April 28, 2017 5:23 pm

Montana timber companies are happy that President Trump has slapped new import taxes on Canadian forest products, but backlash is hurting a coal company here.

On Wednesday the premier of British Columbia asked Canadian Prime Minister Justin Trudeau to retaliate against the timber tariffs by shutting down U.S. access to a seaport in Vancouver. That letter caused the stock price of Cloud Peak Energy to drop by 10 percent yesterday.

Cloud Peak runs the Bull Mountain coal mine near Roundup. According to Bloomberg, Bull Mountain is America’s biggest exporter of coal that’s burned for energy, and sells more than 90 percent of its output to Asia. (CORRECTION: Cloud Peak Energy operates the Spring Creek Mine near Decker, Mont. The Bull Mountain mine is operated by Signal Peak Energy. We regret the error).

In a conference call with investors yesterday, Cloud Peak CEO Colin Marshall urged Wall Street to relax.

"If you read the letter, it was a request — it wasn’t actually – and we don’t know of any trains that are being turned back at the border yet, so I think we’ve got a long way for this to run," Marshall said.

Marshall said he remains optimistic that Cloud Peak will meet its goal of shipping 5 million tons of Montana coal to Asia in 2017, despite bad weather in the Pacific Northwest the first quarter of this year severely curtailing exports.

But investors are clearly worried, five out of six who asked questions on the earnings call asked about Cloud Peak’s access to the seaport, including how it could affect further development of the Spring Creek mine near Decker.

Investor (Name unintelligible): How can you commit capital to new projects serving the export markets if the right to ship can be taken away on a whim?

Cloud Peak CEO Colin Marshall re-emphasized that so far it’s only talk about closing U.S. access to the Canadian port, and that he thinks the U.S. coal market is poised for a rebound as well:

"The new administration has clearly brought a completely different approach to the fossil fuel industry, and coal in particular. Immediate actions, such as those to halt the stream protection rule, lift the moratorium on federal coal leasing, and suspend the change to coal valuation are most welcome after years of anti-coal regulations."

Cloud Peak Energy’s stock closed at $3.37 a share today, that’s down about 60 cents from its high on Wednesday.

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