Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
While not rising at quite the dizzying pace of the coking variety, thermal coal has added 37% in value this year with the benchmark Australian export price recently coming within shouting distance of $70 a tonne.
According to a report from Bloomberg a new agreement between Chinese policymakers and its major producers could give another leg up for the price of coal used in power generation.
According to Bloomberg China’s “comfortable range” for Bohai-Rim coal is 450 to 500 yuan a tonne ($67 to $75). Under the new plan, Chinese miners will cut or boost output to keep coal prices within the desired range:
“China’s policy isn’t designed to give a free kick to seaborne producers,” said Daniel Morgan, an analyst with UBS Group AG in Sydney. “They have constrained output and forced prices up too high and there might be some relaxation of this policy. We just question the sustainability and the magnitude of the price rise.”
A new report by Wood Mackenzie assessing the impact of climate change on the global trade in coal used in electricity generation paints a very different picture.
The study follows the US and China formally ratifying the COP21 Paris climate agreement last weekend at the G20 summit in China. Wood Mackenzie forecasts a 40% fall in trade in thermal coal if the temperature of the world rises by only 2 degrees Celsius from an estimated 900 million tonnes for 2016 to 527 million tonnes by 2035.
Wood Mackenzie’s modelling suggests prices would likely fall significantly and stay below $50 per tonne (FOB Newcastle in real terms) post-2020.
