Column: BHP joins the lengthening list of nickel price casualties
Indonesia's nickel production surge is challenging the West's ambitions of diversifying its critical metals supply chains.
Excess supply and poor demand are two of the main factors pushing global thermal and metallurgical coal prices to some of the lowest levels seen in years. Far from improving, the situation is getting worse, as China announced Monday its coal inventories area reaching record highs.
Interviewed by China Radio and quoted by Capital Value, Wang Lubiao, vice general manager at Qinhuangdao Port, said there are at least 9.4 million tonnes of coal in storage since June, approaching the historical high of 9.42 million tonnes. He added the majority of coal storage yards have been closed as stock piles have met maximum holding power.
Thermal coal prices recently hit a two-year low at the Australian port of Newcastle.
Analysts are adding to the pessimistic outlook saying that Beijing appears unable to keep the coal balance right and it that might not be a long-term structural importer of thermal coal.
On Friday, Bernstein Research published a note on the topic of China’s coal reserves:
“The stakes couldn’t be higher: from the outside looking in, the US has just joined Australia, Colombia, Indonesia, Mozambique, Mongolia and South Africa on the list of coal exporters that believe Chinese coal consumption and import growth are a one-way trade. If that assumption is wrong, where does all that coal go?”
While Bernstein doesn’t say whether China will continue to be an importer of coal in the long term, the analysts note that the country’s cost of coal production appears to be getting lower.
Prices for low-volatility coking coal have fallen nearly a third over the past year, and analysts from Platts think that the outlook for 2013 isn’t any better.
In a recent report, Platts says that weak demand from key markets has not helped the situation. Chinese and Indian coal users acknowledged that inventories of prime-quality coking coal are low at present, but appeared unwilling to translate this situation into active market bids.
Quoting a Commonwealth bank report, Platts revised its 2013 price projections downward by 10 percent to $213/mt FOB Australia for 2013 and 5 percent to $205/mt FOB for 2014 due to rising supply.
Coking coal miners are starting to feel the impact of the price decline, says Coal Investing News:
Russian coal and steel producer Mechel (NYSE:MTL) recently announced a near 30 percent reduction in net profits due in great part to declining prices and sales of its raw materials.
Coking coal prices for delivery from Mechel to South Korea and Japan fell from US$215 to $220 per tonne in the first three months of 2012 to US$185 to $190 per tonne in the second quarter, the company’s vice president, Oleg Korzhov, told Reuters this week.
