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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, 10 July 20
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- TNB Fuel Sdn Bhd - Malaysia
- Eastern Coal Council - USA
- Bharathi Cement Corporation - India
- CNBM International Corporation - China
- Sarangani Energy Corporation, Philippines
- Formosa Plastics Group - Taiwan
- MS Steel International - UAE
- SMG Consultants - Indonesia
- Bangladesh Power Developement Board
- Renaissance Capital - South Africa
- Standard Chartered Bank - UAE
- Australian Commodity Traders Exchange
- Edison Trading Spa - Italy
- Global Green Power PLC Corporation, Philippines
- Central Electricity Authority - India
- Global Coal Blending Company Limited - Australia
- Chettinad Cement Corporation Ltd - India
- Dalmia Cement Bharat India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Mjunction Services Limited - India
- Chamber of Mines of South Africa
- IEA Clean Coal Centre - UK
- Cigading International Bulk Terminal - Indonesia
- Thiess Contractors Indonesia
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- Bhushan Steel Limited - India
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- Interocean Group of Companies - India
- GMR Energy Limited - India
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- Bank of Tokyo Mitsubishi UFJ Ltd
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- Banpu Public Company Limited - Thailand
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- Economic Council, Georgia
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- Maheswari Brothers Coal Limited - India
- Iligan Light & Power Inc, Philippines
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- Metalloyd Limited - United Kingdom
- Global Business Power Corporation, Philippines
- Australian Coal Association
- Rashtriya Ispat Nigam Limited - India
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- Ministry of Finance - Indonesia
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- Georgia Ports Authority, United States
- SN Aboitiz Power Inc, Philippines
- Wilmar Investment Holdings
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- Bhatia International Limited - India
- Indian Oil Corporation Limited
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- Salva Resources Pvt Ltd - India
- Central Java Power - Indonesia
- CIMB Investment Bank - Malaysia
- Leighton Contractors Pty Ltd - Australia
- Africa Commodities Group - South Africa
- Indika Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Independent Power Producers Association of India
- Ambuja Cements Ltd - India
- Bayan Resources Tbk. - Indonesia
- Eastern Energy - Thailand
- Miang Besar Coal Terminal - Indonesia
- Indian Energy Exchange, India
- Ceylon Electricity Board - Sri Lanka
- Lanco Infratech Ltd - India
- Sical Logistics Limited - India
- International Coal Ventures Pvt Ltd - India
- Romanian Commodities Exchange
- PowerSource Philippines DevCo
- Energy Development Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Orica Mining Services - Indonesia
- Videocon Industries ltd - India
- Binh Thuan Hamico - Vietnam
- Mercator Lines Limited - India
- India Bulls Power Limited - India
- Simpson Spence & Young - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Kohat Cement Company Ltd. - Pakistan
- ASAPP Information Group - India
- Timah Investasi Mineral - Indoneisa
- TeaM Sual Corporation - Philippines
- Bahari Cakrawala Sebuku - Indonesia
- Samtan Co., Ltd - South Korea
- Power Finance Corporation Ltd., India
- Pipit Mutiara Jaya. PT, Indonesia
- Semirara Mining Corp, Philippines
- Xindia Steels Limited - India
- Kideco Jaya Agung - Indonesia
- Uttam Galva Steels Limited - India
- Parry Sugars Refinery, India
- Gujarat Mineral Development Corp Ltd - India
- Price Waterhouse Coopers - Russia
- Oldendorff Carriers - Singapore
- Electricity Authority, New Zealand
- Straits Asia Resources Limited - Singapore
- Merrill Lynch Commodities Europe
- Altura Mining Limited, Indonesia
- European Bulk Services B.V. - Netherlands
- Tamil Nadu electricity Board
- Petron Corporation, Philippines
- Energy Link Ltd, New Zealand
- San Jose City I Power Corp, Philippines
- Goldman Sachs - Singapore
- White Energy Company Limited
- Manunggal Multi Energi - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Heidelberg Cement - Germany
- Meralco Power Generation, Philippines
- Kumho Petrochemical, South Korea
- Planning Commission, India
- Latin American Coal - Colombia
- Port Waratah Coal Services - Australia
- Orica Australia Pty. Ltd.
- Barasentosa Lestari - Indonesia
- Rio Tinto Coal - Australia
- Attock Cement Pakistan Limited
- Bukit Baiduri Energy - Indonesia
- Bhoruka Overseas - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Coalindo Energy - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Commonwealth Bank - Australia
- Deloitte Consulting - India
- Meenaskhi Energy Private Limited - India
- Tata Chemicals Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- GAC Shipping (India) Pvt Ltd
- GN Power Mariveles Coal Plant, Philippines
- The State Trading Corporation of India Ltd
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- Cement Manufacturers Association - India
- Posco Energy - South Korea
- Marubeni Corporation - India
- Star Paper Mills Limited - India
- Antam Resourcindo - Indonesia
- Toyota Tsusho Corporation, Japan
- Riau Bara Harum - Indonesia
- IHS Mccloskey Coal Group - USA
- Indonesian Coal Mining Association
- Savvy Resources Ltd - HongKong
- Jorong Barutama Greston.PT - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Sree Jayajothi Cements Limited - India
- Siam City Cement PLC, Thailand
- Mercuria Energy - Indonesia
- The University of Queensland
- GVK Power & Infra Limited - India
- Minerals Council of Australia
- Directorate General of MIneral and Coal - Indonesia
- McConnell Dowell - Australia
- Parliament of New Zealand
- PTC India Limited - India
- Trasteel International SA, Italy
- Anglo American - United Kingdom
- PNOC Exploration Corporation - Philippines
- Sojitz Corporation - Japan
- Kobexindo Tractors - Indoneisa
- Aboitiz Power Corporation - Philippines
- Gujarat Sidhee Cement - India
- Borneo Indobara - Indonesia
- OPG Power Generation Pvt Ltd - India
- Kepco SPC Power Corporation, Philippines
- SMC Global Power, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Thai Mozambique Logistica
- Sindya Power Generating Company Private Ltd
- Krishnapatnam Port Company Ltd. - India
- Mintek Dendrill Indonesia
- Kaltim Prima Coal - Indonesia
- Carbofer General Trading SA - India
- Ministry of Transport, Egypt
- Agrawal Coal Company - India
- Larsen & Toubro Limited - India
- Ministry of Mines - Canada
- AsiaOL BioFuels Corp., Philippines
- Maharashtra Electricity Regulatory Commission - India
- New Zealand Coal & Carbon
- Karbindo Abesyapradhi - Indoneisa
- Wood Mackenzie - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Directorate Of Revenue Intelligence - India
- Kartika Selabumi Mining - Indonesia
- Coal and Oil Company - UAE
- Makarim & Taira - Indonesia
- South Luzon Thermal Energy Corporation
- Malabar Cements Ltd - India
- Indogreen Group - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Bulk Trading Sa - Switzerland
- Vizag Seaport Private Limited - India
- Gujarat Electricity Regulatory Commission - India
- Aditya Birla Group - India
- Baramulti Group, Indonesia
- Indo Tambangraya Megah - Indonesia
- The Treasury - Australian Government
- Holcim Trading Pte Ltd - Singapore
- Singapore Mercantile Exchange
- ICICI Bank Limited - India
- Vedanta Resources Plc - India
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