Specialist hard-coking
coal prices around the world bode ill for likes of debt-laden Solid Energy and
litigation-bound Bathurst Resources, and their respective West Coast operations
in New Zealand.
Since 2011, hard-coking
coal had plunged in price from $US290 a tonne to about $US140. Similarly,
lower-grade thermal coal (on Newcastle prices) for energy generation has gone
from $US121 to a tonne to about $US94.
Hard-coking prices in 2008
were 60% higher at $US350, a period when Solid Energy was investigating several
speculative fossil fuel alternatives, and in 2011 were still about $US330.
However, Solid Energy was
plunged into crisis in March because of the declining global coal price, leaving
it shedding hundreds of staff and revealing about $390 million of debt.
Bathurst is fighting its way through the courts over consent challenges, which
has stalled it by about 18 months.
Research by Craigs
Investment Partners has highlighted market instability. "With prices below
US$140 a tonne the consequences for the coking coal industry could be quite
severe," the research said.
Also stating that China's
coal consumption remained ''key'' to Coal exporters, but highlighted market
instability reflected in buyers purchasing ahead by only one month at a time,
instead of by the quarter.
''The forward contracts
are the key; it's the quarterly contracts which offer stability,'' to
producers.
He said the price
settlement, for the second quarter to June, was ''surprisingly high'' at $172 a
tonne and he expected buyers to pressure producers on price to better reflect
the likely conditions of the third quarter.
While overall global
prices could remain depressed, Craigs research noted Chinese imports were on
track to rise by about 30% this year, underpinned by strong domestic steel
output and a ''greater availability'' of coking coal from Australia.
Mr McIntyre cautioned that
downgrades in Chinese economic growth forecasts were likely this quarter,
including liquidity constraints and the Chinese Government's concerns about
overcapacity and asset values.
Similarly, economic growth
in India and Brazil had been ''disappointing'' and a price recovery later in
the year could be undermined by India and Brazil's combined consumption.
While prices could be
depressed, Mr McIntyre was ''cautiously confident'' that both India and
Brazil's imported coal growth would be about 8% during 2013.
About half of Solid
Energy's annual 4 million-tonne coal output was the export-quality hard-coking
coal, while the majority of Bathurst's targeted 3 million-tonne output will be
hard-coking coal, Mr McIntyre said ''If coal prices get much lower, I'd be
surprised if many of the high production-cost operators can keep going”.