Tuesday, June 30, 2015

Metallurgical Coal Outlook

Benchmark prices for high-quality met coal for the third quarter of 2015 settled at $93 a metric ton. The second quarter benchmark of $110 was already tracking roughly $10 below the settlements from the past four quarters. 

“Once supply cuts take effect, we expect prices to improve somewhat; however, any material recovery is increasingly appearing unlikely over the next 18 months,” said Moody’s. 

The ratings agency estimated that the about 300-million-ton seaborne market was currently oversupplied by roughly 5% to 10%, with global suppliers, mostly in Australia and the US, having already announced supply cuts of over 30-million metric tonnes since early 2014. 

However, these were slow to take hold, Moody’s noted. Production volumes were also being propped up by cost curves shifting lower, owing to falling oil prices and currencies weakening against the US dollar, particularly the Australian dollar, the source of over half of global met coal production. 

“Despite the downward trend of the global cost curve, we believe a significant portion of global met coal production remains uneconomic and further production cuts will be necessary to bring the markets back into balance,” Moody’s warned.

Thursday, June 25, 2015

What's driving Asia's spot met coal price rebound?

What's driving Asia's spot met coal price rebound?

In this podcast, Platts editors Edwin Yeo and Kenneth Foo analyze the factors that have contributed to the recent rebound in metallurgical coal spot prices, its impact on quarterly negotiations between Japanese steel mills and large mining companies, as well as China's gradual acceptance of seaborne Australian coal.

Monday, June 22, 2015

Australian coal prices rise as scorching Asian heat pushes up demand

Australian coal prices have risen almost 8% since the beginning of June as a drought in South Asia pushes up power demand, although the overall sentiment in the sector remains bearish due to falling imports by other major Asian buyers. 

Coal prices for prompt physical delivery from its Newcastle terminal have risen 7.85% since the beginning of the month to a last settlement of $62.50/t. 

That rise puts it at parity with South African cargoes for the first time since early May. 

It puts both southern hemisphere prices almost $5/t  above cargoes sold to Europe's ports of Amsterdam, Rotterdam or Antwerp (ARA), which also include the cost of freight, making their discount in real terms even steeper. 

The higher prices in South Africa and Australia, which largely export to Asia, are a result of scorching weather linked to the El Nino pattern in South Asian countries like India, Pakistan and also Vietnam. 

The El Nino phenomenon is spurring power demand and resulting in lower exports from countries like Vietnam and higher import orders from local utilities. 

Commodity brokerage Marex Spectron said it was "bullish as the supply conditions remain relatively tight in the short term." 

The overall outlook for the sector; however, remains one of oversupply as economies across Asia slow and most countries make efforts to increase the use of cleaner energy sources.

China's coal imports fell around 40% in the first five months of the year as the policies aimed at cutting imports of low-quality grades and increasing the use of cleaner energy bite.

In Japan, Asia's second biggest economy, official data showed on Wednesday that imports of thermal coal for power generation declined 15.3% in May to 5.98-million tonnes. 

South Korea's imports of coal fell 10.5% in May from a year earlier, customs data showed this week. 

Wednesday, June 17, 2015

Glencore sees slight coal undersupply

Mining and marketing giant Glencore sees a slight undersupply of coal on the horizon. 

Speaking on video to Creamer Media’s senior staff writer Zandile Mavuso at Glencore’s donation of a new R75-million state-of-the-art school to South Africa’s Department of Basic Education, Glencore CEO Ivan Glasenberg outlined higher expected future demand for seaborne coal, owing to the world’s biggest coal exporter Indonesia absorbing a large volume of previously exported coal for its own new coal-fired power stations and India, China and Korea also requiring coal for new thermal stations. 

“There seems to be a little bit of, we believe, undersupply,” Glasenberg commented in the attached video interview. (To watch video, click on icon in picture). 

“We’re still very positive on coal in the future,” he said, putting current global seaborne coal demand at some 950-million tonnes of coal a year, with Indonesia poised to supply progressively less than its current 450-million tonnes a year over the next five years. 

While the availability of shale gas was allowing the US to use less coal, new coal-fired power stations in India, China, Korea and Indonesia were driving demand. 

From 2015 to 2020, at least 150-million tonnes of Indonesian coal would be used domestically rather than being exported. 

As coal remained the cheapest form of energy, developing nations were still building and developing coal-fired stations to grow their economies. 

India, which was currently importing 200-million tonnes of coal a year, was set to increase that to 250-million tonnes and potentially 300-million tonnes of coal a year. 

The seaborne coal market would thus continue to grow with the potential for wealthier nations to assist developing nations to burn coal in a cleaner manner, which was possible.

“We’ve said before that wealthier nations should assist the poorer nations to develop better coal-fired facilities so that they can burn coal in a cleaner manner,” Glasenberg said. 

On when the time would be right for more investment in coal mining, he outlined the necessity of that being triggered by much higher demand than supply, “which right now looks pretty balanced”. 

While he expected demand to rise in 2017 and 2018, he strongly reiterated the London-, Hong Kong- and Johannesburg-listed company's firm policy of only investing in increased production when the company is certain of not hurt existing production. 

“You’ve got to assess the future market before you put in more of whichever commodity you are producing and you’ve got to assess demand. For coal, if the demand is not there, we’ll cut back production,” Glasenberg promised.  

Investec Securities said in a note on Tuesday that the projection by Australia's Queensland Resources Council of record coal exports from Queensland this year and 5% higher coal exports from New South Wales supported the Glencore view. 

"Prices may be weak but demand remains strong and consumers must be gleeful," commented Investec, which added that exports were being buoyed by demand from India, owing to its shifted emphasis towards cleaner coals.

Monday, June 15, 2015

Record coal exports forecast from Queensland

Despite the downturn in prices, Queensland coal exports were expected to reach a record 220-million tonnes during the 2015 financial year, which ends in June, the Queensland Resources Council (QRC) reported on Monday. 

QRC CEO Michael Roche said that there was still significant demand for the state’s commodities, as international markets continued to grow in the face of growing energy demands. 

At the end of May, year-to-date coal exports were 200-million tonnes. 

“This new record level of coal exports will be 5% higher than last year's 209-million tonnes, driven by continued strong demand from China, Japan, India and Korea for the Bowen basin's high-quality coking coals, used in production of raw steel. 

“In the medium term, we expect those Queensland export numbers to increase with the growth in demand for Queensland thermal coal from energy hungry nations such as India,” Roche said. 

He pointed to a recent report by the Office of the Chief Economist in the Federal Industry Department, which revealed India's demand for coal was set to grow significantly owing to the construction of new coal-fired power stations that require the high-quality thermal coal Australia can deliver. 

Construction in India was also growing and Queensland was ready to supply more of its coking coal to service growing steel production, Roche said. 

“The Indian Minister for State for Power, Coal and New and Renewable Energy Piyush Goyal recently said that coal would remain the mainstay of India's energy needs. 

“From 2017, India's new coal-fired projects require high-energy low-ash coal. India's domestic coal is largely high-ash low-energy.” 

Roche added that there were about 300-million people in India who did not have access to basic electricity, and added that the Indian government has been clear it wanted to change that. 

“Despite the claims of the well-funded anti-coal activist campaign, the future looks bright for Queensland coal to meet strong energy and steel demand in developing nations.”