Wesfarmers slashes coal price but experts see no reason to panic

The price of coking coal is likely to remain buoyant despite a recent price cut by Wesfarmers (ASX:WES) and softening Chinese demand for steelmaking inputs.

Wesfarmers, an Australian conglomerate based in Perth, over the weekend cut the price it receives for its Curragh coal to US$280 a tonne over the next three months. The move prompted analysts to consider whether coal, like several commodities like copper, nickel, and zinc, is the next domino to fall as slowing global growth pinches commmodities.

But experts say that the lower coal price agreed to by Wesfarmers, and earlier by Anglo American, which is selling coking coal to Korea for US$285/tonne (coal has been above $300/t for most of this year) is less about falling demand than oversupply, as coal production picks up again in Queensland after suffering a slowdown from last year’s flooding.

Syndey Morning Herald quotes Citibank commodities analyst Daniel Hynes saying that coal and iron ore prices would suffer if Chinese data continues to weaken, but he predicted both markets will  “remain tight” for the next 12 months.