Copper price extends gain on Chinese recovery while US election looms
Prices climbed as much as 0.9% after China’s monthly services activity expanded at the fastest pace since July.
A steep drop-off in demand from Asia – last week it was reported that at least 30 coal carriers with unsold cargo are floating off China’s coast – exacerbated by high inventories thanks to a mild northern hemisphere winter and a surge in US exports have led to a collapse in thermal coal prices.
Ratings agency Fitch said on Thursday it expects thermal coal price to stay under pressure into next year according to the Hindu Business Line and warned sustained low coal prices “could shift buyers from low-rank coal to higher-grade coals and, thus, negatively affect both demand and the realised prices for low-rank coal.”
Irwan Budiarto, PT Bahana Securities analyst writing in the Jakarta Post is even more pessimistic and sees prices steadily decline to average $80 a tonne in 2014, down from a predicted $85 next year.
In China’s Qinhuangdao, the world’s largest coal port by capacity (9m tonnes), inventories have exceeded levels last seen in late 2008 during the height of the financial crisis. At that time, thermal coal prices dropped sharply. Last week, Qinhuangdao’s inventory reached 8.2m tones, up 1.1m tones in just 10 days, suggesting lack of demand. It is clear that thermal coal prices have only one way to go: Down.
Marketwatch quotes Norman Mbazima, chief executive of Anglo American’s Thermal Coal division as concurring with the view: “In the short term, we will have a bearish market,” Mbazima said on Thursday, although he believes longer term prospects remain bright.
FT.com reported earlier this week analysts now expect “meaningful” cutbacks in production to support prices and that “coal executives believe that as much as 10 per cent of the production serving the seaborne market could be losing money at current prices”
Coal for power generation at the port of Newcastle in Australia, the benchmark for Asia, crept back above $88 a tonne on Thursday after hitting its lowest level since June 2010 at the start of the week.
Thermal coal price is down more than a fifth since the start of the year. The post-financial crisis low for thermal was March 2009 – during that month coal averaged $65.36.
4 Comments
art biddulph
I find it rather odd that the Obama admin. is closing coal fired plants inthe USA because of the adverse affects on our atmosphere and at the same time floding the world market with thermal coal to produce electricity in china. Hipocritical in any sense.
Tom
So Thermal is on Freefall as ….. CAN ANY BRIGHT ANALYST GIVE US THE DOOM AND GLOOM ON HYDROCARBONs EFFECT, PRICES, WORD ECONOMY, JOBS ie give some lattitude in market(s) sustainability To me the writing is drafted on the Wall “low thermal prices = low Oil & Gas pricing / futures …. hmmm what should one do. Myself, looking for real (estate) dirt
Cheers
Tom at Salter
Gcsharpe
I do not have the luxury to wait out this bear market much longer. The demand for geologists has gotten so bad, that I have no choice but to seek another line of work.
Chemrox
Don’t know your expertise and location but in Africa it’s still going “gangbusters”.
S.C.Muller, P.Geo
Exploration Manager in Tanzania