Coal and Coke Market Analysis
Thermal Coal Prices
Coking Coal Prices
Coal & Coke Stocks
Coal Freight

BHP Billiton and Mitsubishi to Cut 700 Jobs at Coal Mines
Coal India to Raise Prices
European Thermal Coal Front-month Price Dips on Subdued Demand
Chinese Demand Coal Peak in 2016
Coking Coal Prices to Bottom in Q4, Track China Demand Uptick in 2015

Thermal COAL PRICES

Price of Thermal Coal at Qinhuangdao Port on Sep 24, 2014 

I.D: Foreign Quotes of Indonesian Coal in China on Sep 24, 2014 

M.N: Foreign Quotes of Mongolian Coal in China on Sep 24, 2014  

S.A: Foreign Quotes of South African Coal in China on Sep 24, 2014  　　　

AUS: Foreign Quotes of Australian Coal in China on Sep 24, 2014  

C.O: Foreign Quotes of Columbian Coal in China on Sep 24, 2014 

U.S: Foreign Quotes of American Coal in China on Sep 24, 2014 

RUSS: Foreign Quotes of Russian Coal in China on Sep 24, 2014 

COKING COAL PRICES

Price of Imported Australian PCI Coal on Sep 23, 2014

Product	Specification	Producing Place	Price (US$/Tonne)	Change	Remark
Coking Coal(Clean)	CSR74 V20.7 A10.5 S0.6	Australia	110.25	-0.25	FOB
Coking Coal(Clean)	CSR64 V25.5 A9 S0.6	Australia	97.00	-	FOB

Price of Imported Australian Coking Coal on Sep 23, 2014

Product	Specification	Producing Place	Price (US$/Tonne)	Change	Remark
PCI Coal	Low Volatile	Australia	88.00	+0.25	FOB
PCI Coal	Low Volatile;A12	Australia	80.50	-0.50	FOB

COAL & COKE STOCKS

Steam Coal Stocks at Port Qinhuangdao on Sep 24, 2014 

Steam Coal Stocks at Port Guangzhou on Sep 24, 2014 

Steam Coal Stocks at Port Jingtang on Sep 24, 2014 

Steam Coal Stocks at Port Caofeidian on Sep 24, 2014 

Weekly: Metallurgical Coke Stocks at Major Chinese Ports on Sep 24, 2014 

Weekly: Coking Coal Stocks at Major Chinese Ports on Sep 24, 2014 

COAL FREIGHT

Coal Freight Rates on Sep 24, 2014 

COAL AND COKE MARKET ANALYSIS

 BHP Billiton and Mitsubishi to Cut 700 Jobs at Coal Mines

BHP Billiton and Mitsubishi plan to cut 700 jobs at a joint coal mining venture in Australia because of tough market conditions.

Both companies said they found the business was overstaffed following an operational review.

The job cuts account for about 7% of the joint venture's total workforce.

The joint venture, which includes seven coal mines and a coal terminal in Queensland, is the world's biggest exporter of coal used in steelmaking.

"The coal industry continues to face challenging market conditions and had to act to ensure the long-term viability of the business," the BHP Billiton-Mitsubishi Alliance (BMA) said in a statement.

Coking coal mines have been closed or seen production plummet after prices hit a six-year low because of global oversupply.

Coal prices currently trade at about $110 (£67) a tonne, but some analysts believe that may fall further as a result of weak demand from top buyer China.

"A slowdown in China's manufacturing marks low demand from an economy which Australia relies on heavily for commodity exports," Desmond Chua from CMC Markets said.

BHP has called its coal unit one of its "four pillars of growth" along with iron ore, copper and petroleum products.

However, the firm has been under pressure to lower operating costs because of a slump in iron ore and coal prices. Both raw materials are used in the production of steel.

Last week, it also announced plans to cut jobs at its Port Hedland iron ore mines in Australia. (Source: BBC)

Coal India to Raise Prices

Coal India may raise prices of lower-grade coal, used to generate power, by a little over 10%, a move that will help offset the fall in miner's revenues from selling smaller volumes through e-auctions, reports Indronil Roychoudhury in Kolkata. A CIL director told FE, on the condition of anonymity, a proposal to rationalise prices of coal had been mooted by Eastern Coalfields (ECL), given the huge disparity in cost per kcal/kg between higher and lower grades of coal. The director said coal and power minister, Piyush Goyal, had, in principle, agreed to the idea of rationalising prices and CIL was awaiting a go-ahead.

The price revision could be reviewed soon at a board meeting; while the board had earlier considered a hike of 10-12%, to compensate for smaller volumes sold through e-auctions and higher freight, the raise had been held back. CIL has been asked by the Centre to restrict sales via e-auctions to 5% of total production—roughly 20-22 million tonnes — from 10%.

Realisations from e-auctions have been falling and are currently ruling at Rs 2,200/ton but the premium earned from such sales might go up with the quantity sold being lowered.

Meanwhile, the miner has reported disappointing production numbers so far in 2014—about 4.4% below the target. CIL ended FY2014 with a mere 1% growth in despatches missing targets and reporting a drop in profits of 13% y-o-y to Rs 15,000 crore The power and coal minister informed Parliament recently that approximately 52mt of coal capacity was behind schedule due to delays in land acquisition, and forest and environment clearances.

Subrata Chakravarty, ECL's director technical explained to FE that coal prices across grades are "lopsided and there has to be a balance". While price per kcal/kg works out to 70 paisa for higher grade of coal—say coal with GCV ( gross calorific value) ranging between 6,400 and 6,700 kcl/kg?C , price per kcal/kg works out to be 17 paisa for lower grades of coal ?C say coal with GCV ranging between 2,500 and 2,800 kcal/kg.

"Per kcal/kg should cost the same across all 17 GCV grades and automatically coal of higher GCV would cost more than coal of lower GCV. But at present there is disparity in pricing system and higher grades of coal with GCV of 5,800 kcal/ kg to GCV of 6,700 kcal/ kg and above are priced more than it should actually be. For this reason there are virtually no takers for higher grades," Chakravarty said.

According to a coal ministry official, the ministry is open to the idea of a price rationalisation though the issue is yet to be taken up formally. He said the ministry has also agreed to increase the e-auction sales limit from 5% of the total production to 7% and is mulling re-visiting the scheme of price pooling of domestic and international coal. The ministry would, however, wait for the Supreme Court's order on coal block allocation ?Cexpected later this month. He said it might be difficult for CIL to take a call on a price revision in the absence of 6 independent directors and a regular chairman and managing director on the board. (Source: Financial Express)

European Thermal Coal Front-month Price Dips on Subdued Demand

Reuters reported that European thermal coal lost more ground on Monday on weak demand, taking the front-month physical contract down more than 5% since the start of the month.

European coal cargoes for delivery in October to Amsterdam, Rotterdam and Antwerp (ARA) were trading at USD 72.00 a tonne at 1308 GMT on the GLOBALcoal platform, down 80% from the previous settlement.

Front-month prices have lost more than 5% of their value since the beginning of September. European coal demand has been weak this year due to mild weather and subdued power demand from industry.

Australian cargoes for delivery in November from the port of Newcastle, an Asian benchmark, were 20% higher at USD 66.15 a tonne, while the December contract inched down by 5% to USD 65.50 a tonne.

Deutsche Bank analysts said that around 9.6 million tonnes of a total 54 million tonnes of Australian exports to China could be affected by China's restrictions on coal with high-ash content from next year.

However, it is possible that a lesser amount or no volumes at all would be prevented from being imported if they are consumed outside the Chinese regions with the restrictions.

The analysts said that "The effect of the guidelines is arguably greater in terms of restricting domestic production of low-calorific coal and low-quality coal."

They said that "On the margin, this could have a positive effect on Chinese import demand to offset any domestic production which may have to be halted." (Source: Reuters)

Chinese Demand Coal Peak in 2016

Reuters reported that Chinese demand for thermal coal could peak as soon as 2016, having a potentially crippling impact on the global coal industry.

Coal companies are already facing challenging times, as the industry looks to cheaper and cleaner alternatives. Future demand for coal may slacken, further dampening prices. All of these factors led to the Carbon Tracker Initiative concluding in a new report that "coal is a sinking ship".

The report is issued under the auspices of raising awareness to the financial risks faced by investors in the coal industry. The sector needs USD 112 billion of investment in coal mine expansion and development to sustain itself, CTI said, and the high costs new mines are not economic at today's prices and are unlikely to generate returns for investors in the future.

The authors drew on research from the Institute of Economics and Financial Analysis (IEEFA), which found China's demand for coal will peak in 2016 and steadily decline thereafter. The country may become a net exporter but it's unlikely there will be any other country in a position to take up the lag in demand that would be left by China.

The authors wrote "China currently represents around half of the global thermal coal market and will be critical to the future levels of consumption and seaborne market structure. Alongside the IEEFA low-demand model, a number of mainstream coal analysts from investment research houses [Deutsche Bank, Bernstein, Morningstar] expect Chinese coal demand peaking by 2016 or sooner."

Coal exporters are increasingly pinning their hopes on India, especially given the sheer levels of investment required in their industry and infrastructure. But CTI warns the current price of electricity cannot support continued expensive imports of coal and that India's weak financial system cannot continue issuing non-performing loans to help grow a loss-making power and distribution sector.

The environmental upside is that Chinese carbon dioxide emissions could peak before 2020, since they have historically tracked coal consumption so closely.

Mr James Leaton, research director at CTI, said that "The world's coal industry is playing music chairs with demand, every time the music stops another piece of the market is being taken away."

At the crux of the think tank's research is the finding that demand for the seaborne coal market could fall drastically over the next 20 years, to 850 million tonnes per year, which would require a breakeven price of USD 75 per tonne. Mines with costs higher than this will struggle to attract investors, or at least pay them the desired rate of return.

There are numerous large coal facilities coming online in the future that would struggle to make the figures work in such a low-demand scenario, CTI said, including the Galilee Basin in Australia and the Powder River Basin in the US.

Perhaps anticipating the shift, the likes of Rio Tinto and BHP Billiton have been shedding assets in Australia, Mozambique and South Africa, sometimes spinning them off into newcos, in an effort to manage the potential future cost.

The report said that "Any investor should already be questioning whether high-cost thermal production can turn a profit. This is an opportunity for active shareholders to ensure diversified miners are limiting their exposure to losses in the thermal coal business." (Source ?C Reuters)

Coking Coal Prices to Bottom in Q4, Track China Demand Uptick in 2015

Seaborne coking coal contract prices are seen likely to bottom at $118/mt in the fourth quarter before starting to pick up in 2015 tracking an uptick in China's property market, ANZ's Head of Commodities Research Mark Pervan told the International Mining and Resources Conference in Melbourne Tuesday, September 23.

"We are not going to see a strong recovery story. There is still a lot of supply there and Chinese demand is not going to take off," he said.

"The current spot price is around $113/mt and the current contact is at $120/mt. We expect to see maybe $1-2/mt to be taken off that before we see a bit of recovery in 2015."

Platts assessed Premium Low Vol coking coal unchanged day on day at $123/mt CFR China Tuesday, which equates to $110.50/mt FOB Australia after deducting $12.50/mt for Panamax freight.

Pervan said the coking coal market was moving back into a more cyclical pattern after an extraordinary peak in 2011 when floods in the Australian state of Queensland impacted more than half of global supply. "The supply response [to the 2011 price peak] is hitting the market now, just as the Chinese market gets softer. It's the classic commodity story — supply lagging demand by about two years," he said.

"You are at the bottom of the cycle right now, when you are planting the seeds for the next price recovery. [But] we are not seeing replacement production being put in place, we are not seeing new capex going into mines, we are not seeing new investment in coal.

"So, in 2017-18 I suspect we will see a supply squeeze and you could see better prices."

Pervan said China's real estate market, as a pillar industry for steel and thus coking coal demand, was coming off sharply in 2014.

"The Chinese imposed a lot of restrictions on the property market 12 months ago, which is starting to bite now," he said.

"So right now the investor will go short with the property market coming down but I suspect the smart investor looking at the medium to long term can see this is the opportunity to be investing in the market at the bottom of the cycle, with the cycle picking up in two-three years' time."

"The Chinese property market will bottom out in the second quarter of next year. So in regards to steel prices, you have a headwind for the next three-six months when the market is going to be still declining on real estate prices in China, then it will pick up in the second half of next year.

"Coking coal and iron ore prices are likely to start seeing support towards the end of the year on that recovery."

　　LONGER TERM INDICATORS POSITIVE

In the longer term term, the indicators for the seaborne coking coal market were positive from China and from India, Pervan said.

China's steel sector was increasingly moving towards plate production for consumer products in the southern provinces that relied on imported raw material imports and away from rod production using domestic coking coal in the northeast, he added.

"We [ANZ] are pretty confident that China will become more dependent on imports of both coal and iron ore going forward as they reconfigure their steel industry," he said.

"The next story will be India, but we are not getting too excited as it's certainly off a low base. But it's going to grow; it's going to be positive for coking coal because India has a lot of iron ore and it does not have much coking coal.

"But India needs to build its infrastructure. [So] It's not a simple equation," he added. (Source: Platts)