CHARTS: The coming critical minerals trade war is BRICS short of a load
"While a large number of countries around the world continue to talk about securing raw material supply, China is actually doing something about it."
Stock in US coal giant Peabody Energy and India’s ArcelorMittal surged on Monday after their joint bidding vehicle secured a 59.85% stake in Australian metallurgical-coal miner Macarthur Coal and raised its offer for the whole of the company to $5.1 billion.
The deal comes despite the planned introduction of an onerous carbon tax next year which should put further pressure on Australia’s miners already dealing with rising labour costs thanks to the strong Aussie dollar. The takeover is also amid falling coking coal prices which according to a new report is set to pull back to $240/tonne towards the end of next year from historic highs of $330/tonne.
Metallurgical coal has been steadily declining from the record levels of around $330/tonne it was trading at earlier in 2011 and new report from researcher Wood Mackenzie warns prices could drop from the current quarterly price of $285/tonne to under $240/tonne towards the end of next year.
Prakash Sharma, coal market analyst said: ”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.”
Shares in Peabody jumped close to 4.8% to $40.77 on the news while ArcelorMittal’s ADRs added just under 5.5% in New York by early afternoon Monday. Peabody recently lost out on a chance to co-develop Tavan Tolgoi in Mongolia; at 6 billion tonnes the world’s largest deposit of high-quality coking coal.
Mongolia’s National Security Council rejected a deal struck with Peabody, China’s Shenhua and a Russian-Mongolian consortium mid-September, just two months after they were announced as winners. MINING.com reported earlier this month Mongolia has reopened bidding for the western block of Tavan Tolgoi which on its own holds 1.2 billion tonnes of reserves.
MINING.com reported last month the Australian Coal Association says $1.3 billion in proposed government compensation would delay by only one year the premature closure of four of the 21 mines that an industry survey found were under threat from the government’s carbon tax. On top of the carbon tax set to kick in mid-2012, Australian miners also have to contend with the new minerals resource rent tax set at an effective 22.5% rate on the so-called super-profits of the extractive industries.
