Thermal coal prices unlikely to recover in 2013 unless Australia cuts output: sources
Bali (Platts)--5Jun2013/559 am EDT/959 GMT
Global thermal coal prices are unlikely to recover this year unless
Australian coal producers lower production or an unexpected event rattles the
seaborne market and sends prices north, industry experts attending the
Coaltrans Asia conference in Bali, Indonesia, said Wednesday.
An electronic survey conducted during a conference session on Tuesday
showed that 50% of the participants do not expect thermal coal prices to
recover this year because unrestrained coal production will continue.
Thermal coal prices will go down this year, according to Fabio
Gabrielli, Mercuria Energy Trading's director for dry bulk analysis and
He does not expect any other country, other than the US, to cut
production this year. "Until we see Australia cutting, we will not see the
bottom [for prices]," Gabrielli said.
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Guillaume Perret, director of London-based Perret Associates, a
consultancy specializing in coal, iron ore and steel and freight, said global
thermal coal supply remains abundant.
"The market is at the moment at the mercy of any shocks that can trigger
[upward] market movement," Perret said. "We expect a very slow price recovery
in the coming year," Perret said.
Representatives of two Indonesian coal mining companies told
conference delagates on Tuesday that they expect prices to recover next year.
"I don't agree," said Michael Soerjadji, the marketing director of
Adimitra Baratama Nusantara, when asked for his opinion on the electronic
Sreejith Chalakkal, the marketing manager of Bayan Resources, said he
expects thermal coal prices to recover next year because coal producers
have to react to ease cost pressures.
Gabrielli, however, said he expects coal exporting countries, Australia,
Colombia, Indonesia, Russia and South Africa, with the exception of the US,
to continue to increase production despite current depressed international
steam coal prices.
In 2011 and 2012, there was an annual 100 million mt increase in
seaborne thermal coal supply, Gabrielli added. The 2012 coal story was not
about weak demand but more about abundant coal supply, he explained.
Coal producers reacted to the 2007-2008 boom in commodity prices by
ramping up output, which was absorbed by the emergence in 2009 of Chinese
demand for steam coal in the seaborne market and India's appetite for coal,
A bull rally in thermal coal prices was seen in 2010 and mid-2011 as
devastating floods hit Indonesia, Colombia, South Africa and mainly Australia
while the March 2011 earthquake and tsunami in Japan translated to higher
coal demand with the shutdown of nuclear reactors in Japan and Germany, he
Then a US shale gas revolution which led to a massive shift to gas from
coal, a warm winter in 2011 and 2012, an exceptional hydroelectric
power performance in China in 2012 and the Chinese government's decision to
tighten credit in Q3 2012 led to the current depressed coal prices, Gabrielli
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