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.
Metallurgical coal’s dramatic rise this year have caught most observers by surprise and despite predictions of a consolidation price momentum for the commodity seems only to be building. On Wednesday coking coal added another 2.7% trading at $265.50 a tonne bringing one month gains for the steelmaking raw material to more than 24%.
According to data provided by the Steel Index premium Australia hard coking coal prices are up more than three-fold since hitting multi-year lows around $70 a tonne in November last year.
That’s an uptick from the first quarter, but less than half the exports racked up when coal was last trading at today’s prices
While not quite setting such a torrid pace the rise in the price of seaborne prices for coal used in power generation has been just as impressive more than doubling in 2016 to settle at $114.75 a tonne on Tuesday, a near four-year high.
The rally in seaborne steam coal prices bypassed US miners entirely. In fact, prices for Central Appalachian coal (Nymex FOB) has continued its long-term downtrend. Trading at $40 a short ton, CAP prices are down 7.7% year to date and averaging more than 11% below 2015.
Source: BMI Research
Coal from the Powder River basin, (8,800btu/lb) hasn’t fared any better, losing 17% since the start of the year to trade at $9 a short ton this week after dipping as low as $8.25 in September.
According to EIA data the US exported a meagre 9 million tonnes of coking and 3.8 million tonnes of steam coal during the second quarter of this year. That’s an uptick from the first quarter, but less than half the exports racked up when coal was last trading at today’s prices.
The seaborne coal rally was also spurred by supply issues after Beijing’s decision to limit coal mines’ operating days to 276 or fewer a year from 330 before as it seeks to restructure the industry. Chinese government stimulus plans which saw steel production and demand for power pick up only added fuel to the fire.
A new report by BMI Research suggest the coal rally may be running out of steam and that thermal coal prices will weaken over 2017 due to both stronger coal mine production and weaker demand growth in China. The researcher, a unit of Fitch, expects fourth quarter 2016 levels to represent the peak of thermal coal prices for the next several quarters.
China imported 24.3 million tonnes of coal in September, up more than 33% compared to last year according to official customs data. Over the first nine months of the year imports increased 15% to 180 million tonnes compared to the same period in 2015.
In 2011 floods in key export region in Queensland saw the coking coal price touch an all-time high $335 a tonne. Steam coal peaked just shy of $140 a tonne in January 2011.
4 Comments
buddesatva
Coal is over. The political myth of coal will continue because populism works. What is needed is an effective strategy to care for the folks who remain in place to support that defunct industry. We should have no illusions. Just as coal is finished as an industry, the idea that coal miners and their support staff will be retrained as programmers or call center employees are both absurd. Hard truth is the way forward and a concrete, realistic plan is needed. Promising to ‘reinvigorate’ coal as an energy fuel is just plain stupid. That is NOT going to happen.
bcollins
Buddesatva,
Please explain how you would make steel without coal so I can understand your statement.
Technology is available to remove greenhouse gas emissions that are less harmful than the alternatives.
Diogenes60025
Climate change is a false premise for regulating carbon dioxide emissions. Nature converts CO2 to calcite (limestone). Climate change may or may not be occurring, but is is surely NOT caused by human fossil fuels use. These changes in temperature cause changes in ambient CO2, with an estimated 800 year time lag.
There is no empirical evidence that fossil fuels use affects climate. Likely and well-documented causes include sunspot cycles, earth/sun orbital changes, cosmic ray effects on clouds and tectonic plate activity.
Here’s why. Fossil fuels emit only 3% of total CO2 emissions. 95% comes from rotting vegetation. All the ambient CO2 in the atmosphere is promptly converted in the oceans to limestone and other carbonates, mostly through biological paths. CO2 + CaO => CaCO3. The conversion rate increases with increasing CO2 partial pressure. An equilibrium-seeking mechanism.
99.84% of all carbon on earth is already sequestered as sediments in the lithosphere. The lithosphere is a massive hungry carbon sink that converts ambient CO2 to carbonate almost as soon as it is emitted. All living or dead organic matter (plants, animals, microbes etc. amount to only 0.00033% of the total carbon mass on earth. Ambient CO2 is only 0.00255%.
A modern coal power plant emits few air effluents except water vapor and carbon dioxide. Coal remains the lowest cost and most reliable source of electric energy.
“Whom the gods would destroy, they first make mad.” Longfellow
Wolfgang Buehn
The problem is: The nature needed over a million years depositing all the rotten vegetation and bend the carbon in it to earth. The human being is digging it all out within just 200 years of time.