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Wednesday, 19 October 11
METALLURGICAL COAL PRICES TO DROP BELOW US$240/TONNE - WOOD MACKENZIE
 Wood Mackenzie Says Metallurgical Coal Prices to Drop Below US$240/tonne by Q4 2012 But Long-term Demand Fundamentals Remain Robust
Wood Mackenzie’s Near-Term Market Outlook cautions of falling metallurgical coal prices from now to Q4 2012, dropping from the current quarterly price of US$285/tonne for premium hard coking coal to under US$240/tonne. However, this price remains significantly above the marginal cost of production and longer-term drivers point to robust metallurgical coal demand in the Asia-Pacific market.
Prakash Sharma, Coal Market Analyst says, “Prices have started to fall from the last quarter and will continue to decline due to softening demand and the recovery of supply from flood-hit basins earlier in the year. The weakening demand is largely attributed to the global macroeconomic slowdown which appears to have accelerated through the summer in much of the developed world. Leading industrial indicators suggest a sharp deterioration in manufacturing activity – reflected by the decline in global steel production.”
Wood Mackenzie’s Senior Economist, Ed Rawle says, “The global economy has entered a period of extreme uncertainty. Wood Mackenzie’s global Gross Domestic Product growth forecast has been revised down from 3.1% to 2.8% in 2011, and 3.7% to 3.6% in 2012. But there are significant downside risks to this outlook. The Eurozone debt crisis remains unresolved and threatens to trigger a European banking crisis. Due to the sheer scale of the European banking sector, this is of major concern since it would likely lead to a global banking crisis with implications for us all.”
Despite near-term downward price movements, Wood Mackenzie says that several factors have the potential to turn this trend. Firstly, some mines have not fully recovered from the 2011 Queensland floods. The approaching wet season could lead to further delays in some mines attaining full production levels. Secondly, persistent worker-strikes at BHP Billiton Mitsubishi Alliance operated mines have the ability to tighten the market as these operations produce 26% of globally traded metallurgical coal. Lastly, US low-volatility supply has been curtailed by mine outages and changes in blending techniques following various mergers.
In the long-term , investors are still energized by the coking coal space with high margins in a current supply-constrained world. Mr. Sharma explains, ”Strong long-term demand is likely to support Mergers & Acquisitions (M&A) activity that has been ongoing since early 2008. Demand growth will be led by emerging markets with Asia accounting for 75% of global metallurgical coal demand by 2030. China and India will be key demand drivers, contributing to 60% of Asia Pacific’s total import demand.”
The growth potential of China and India can be attributed to their economic climate relative to the rest of the world. Mr. Rawle says, “The bright spot amidst the uncertainty continues to be the developing world. Specifically, we see China and much of Asia powering ahead, drawing on growth drivers that have been deliberately de-coupled from troubled developed economies over the past couple of years.”
Wood Mackenzie says that China’s reliance on coking coal imports will increase due to insufficient supply of high quality coking coal in the domestic market. China is forging ahead with plans to close all blast furnaces under 1,000 cubic metres and install new blast furnaces with capacities in excess of 2,000 cubic metres. The larger furnaces need coke produced from high-quality coking coal. As a result, a larger volume of this type of coal will be required and China will have to turn to suppliers of the likes of Australia, Mongolia and, to a lesser extent, Mozambique who are all expanding supply.
In summary, Mr. Sharma says, ”The industry should expect premium metallurgical coal prices to fall to a price below US$240/tonne from now until Q4 2012. Although further downside price risks remain given ongoing macroeconomic uncertainty and new sources of supply entering the market place, the constant threat of additional unpredictable mine outages and the upcoming rainy season in key supply basins should keep them from falling too far. Long-term demand also remains strong in emerging markets.”
Editor’s notes:
Wood Mackenzie is the most comprehensive source of knowledge about the world’s energy and metals industries. We analyse and advise on every stage along the value chain - from discovery to delivery, and beyond - to provide clients with the commercial insight that makes them stronger. For more information visit: www.woodmac.com. Wood Mackenzie is a research consulting company and it is our preference is to be referred to as research consultants.
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Friday, 18 September 20
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- Ceylon Electricity Board - Sri Lanka
- Sojitz Corporation - Japan
- The University of Queensland
- Simpson Spence & Young - Indonesia
- India Bulls Power Limited - India
- Tamil Nadu electricity Board
- Sindya Power Generating Company Private Ltd
- Indo Tambangraya Megah - Indonesia
- Ministry of Mines - Canada
- CNBM International Corporation - China
- Pendopo Energi Batubara - Indonesia
- Trasteel International SA, Italy
- Karaikal Port Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Petrochimia International Co. Ltd.- Taiwan
- Edison Trading Spa - Italy
- Altura Mining Limited, Indonesia
- Holcim Trading Pte Ltd - Singapore
- Carbofer General Trading SA - India
- Commonwealth Bank - Australia
- Miang Besar Coal Terminal - Indonesia
- ASAPP Information Group - India
- Banpu Public Company Limited - Thailand
- Indonesian Coal Mining Association
- Sinarmas Energy and Mining - Indonesia
- Parry Sugars Refinery, India
- Billiton Holdings Pty Ltd - Australia
- Baramulti Group, Indonesia
- Borneo Indobara - Indonesia
- Meralco Power Generation, Philippines
- Meenaskhi Energy Private Limited - India
- Metalloyd Limited - United Kingdom
- Antam Resourcindo - Indonesia
- Jaiprakash Power Ventures ltd
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Videocon Industries ltd - India
- European Bulk Services B.V. - Netherlands
- Thiess Contractors Indonesia
- McConnell Dowell - Australia
- Siam City Cement PLC, Thailand
- The Treasury - Australian Government
- The State Trading Corporation of India Ltd
- Ministry of Finance - Indonesia
- Georgia Ports Authority, United States
- New Zealand Coal & Carbon
- Rashtriya Ispat Nigam Limited - India
- Mintek Dendrill Indonesia
- Timah Investasi Mineral - Indoneisa
- Lanco Infratech Ltd - India
- Heidelberg Cement - Germany
- Bukit Baiduri Energy - Indonesia
- Riau Bara Harum - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Indogreen Group - Indonesia
- Aboitiz Power Corporation - Philippines
- Bayan Resources Tbk. - Indonesia
- Krishnapatnam Port Company Ltd. - India
- SMG Consultants - Indonesia
- Merrill Lynch Commodities Europe
- Port Waratah Coal Services - Australia
- PowerSource Philippines DevCo
- Ind-Barath Power Infra Limited - India
- Kaltim Prima Coal - Indonesia
- Bharathi Cement Corporation - India
- Larsen & Toubro Limited - India
- Essar Steel Hazira Ltd - India
- Formosa Plastics Group - Taiwan
- Australian Commodity Traders Exchange
- Maharashtra Electricity Regulatory Commission - India
- Neyveli Lignite Corporation Ltd, - India
- Wilmar Investment Holdings
- Savvy Resources Ltd - HongKong
- Kumho Petrochemical, South Korea
- San Jose City I Power Corp, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Barasentosa Lestari - Indonesia
- Aditya Birla Group - India
- Planning Commission, India
- Orica Australia Pty. Ltd.
- Bangladesh Power Developement Board
- Manunggal Multi Energi - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Cigading International Bulk Terminal - Indonesia
- Oldendorff Carriers - Singapore
- Global Coal Blending Company Limited - Australia
- Economic Council, Georgia
- PTC India Limited - India
- Energy Link Ltd, New Zealand
- Latin American Coal - Colombia
- Indian Oil Corporation Limited
- AsiaOL BioFuels Corp., Philippines
- Bukit Makmur.PT - Indonesia
- Intertek Mineral Services - Indonesia
- ICICI Bank Limited - India
- Renaissance Capital - South Africa
- Bahari Cakrawala Sebuku - Indonesia
- Xindia Steels Limited - India
- Minerals Council of Australia
- Interocean Group of Companies - India
- Standard Chartered Bank - UAE
- Vedanta Resources Plc - India
- International Coal Ventures Pvt Ltd - India
- Eastern Coal Council - USA
- VISA Power Limited - India
- Dalmia Cement Bharat India
- GVK Power & Infra Limited - India
- Indika Energy - Indonesia
- Makarim & Taira - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Kideco Jaya Agung - Indonesia
- OPG Power Generation Pvt Ltd - India
- Power Finance Corporation Ltd., India
- Goldman Sachs - Singapore
- Maheswari Brothers Coal Limited - India
- Coal and Oil Company - UAE
- Kobexindo Tractors - Indoneisa
- GMR Energy Limited - India
- PNOC Exploration Corporation - Philippines
- Bhoruka Overseas - Indonesia
- GAC Shipping (India) Pvt Ltd
- GN Power Mariveles Coal Plant, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Chettinad Cement Corporation Ltd - India
- Thai Mozambique Logistica
- Petron Corporation, Philippines
- Coastal Gujarat Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Kohat Cement Company Ltd. - Pakistan
- IEA Clean Coal Centre - UK
- Central Java Power - Indonesia
- SN Aboitiz Power Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Deloitte Consulting - India
- Kapuas Tunggal Persada - Indonesia
- TeaM Sual Corporation - Philippines
- Africa Commodities Group - South Africa
- Karbindo Abesyapradhi - Indoneisa
- Australian Coal Association
- Ministry of Transport, Egypt
- Bhushan Steel Limited - India
- Straits Asia Resources Limited - Singapore
- Grasim Industreis Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Price Waterhouse Coopers - Russia
- LBH Netherlands Bv - Netherlands
- Globalindo Alam Lestari - Indonesia
- Sical Logistics Limited - India
- Medco Energi Mining Internasional
- Kartika Selabumi Mining - Indonesia
- Posco Energy - South Korea
- Wood Mackenzie - Singapore
- Ambuja Cements Ltd - India
- Anglo American - United Kingdom
- Bhatia International Limited - India
- Electricity Authority, New Zealand
- Alfred C Toepfer International GmbH - Germany
- Sarangani Energy Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Mercuria Energy - Indonesia
- Indian Energy Exchange, India
- Mjunction Services Limited - India
- Romanian Commodities Exchange
- Bukit Asam (Persero) Tbk - Indonesia
- Energy Development Corp, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Siam City Cement - Thailand
- Binh Thuan Hamico - Vietnam
- IHS Mccloskey Coal Group - USA
- Madhucon Powers Ltd - India
- Mercator Lines Limited - India
- Sree Jayajothi Cements Limited - India
- Independent Power Producers Association of India
- Vizag Seaport Private Limited - India
- London Commodity Brokers - England
- Global Green Power PLC Corporation, Philippines
- Sakthi Sugars Limited - India
- Iligan Light & Power Inc, Philippines
- Electricity Generating Authority of Thailand
- Jorong Barutama Greston.PT - Indonesia
- Singapore Mercantile Exchange
- Samtan Co., Ltd - South Korea
- MS Steel International - UAE
- Orica Mining Services - Indonesia
- Agrawal Coal Company - India
- Eastern Energy - Thailand
- Rio Tinto Coal - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Semirara Mining and Power Corporation, Philippines
- Malabar Cements Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Parliament of New Zealand
- Coalindo Energy - Indonesia
- Marubeni Corporation - India
- Chamber of Mines of South Africa
- Global Business Power Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- Toyota Tsusho Corporation, Japan
- SMC Global Power, Philippines
- Jindal Steel & Power Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bulk Trading Sa - Switzerland
- Kepco SPC Power Corporation, Philippines
- Gujarat Sidhee Cement - India
- South Luzon Thermal Energy Corporation
- Cement Manufacturers Association - India
- Therma Luzon, Inc, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- White Energy Company Limited
- Uttam Galva Steels Limited - India
- Star Paper Mills Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Attock Cement Pakistan Limited
- Semirara Mining Corp, Philippines
- Tata Chemicals Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Central Electricity Authority - India
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