The Coal Rebound

  • Date: 10/06/16
  • Neil Hume, Financial Times

“Sentiment in the coal market is better than it has been in years,” said analysts at Citi in a report this week.

[…] All of the major thermal coal benchmarks have pushed above $50 a tonne in recent weeks. The price of coal shipped from the Australian port of Newcastle — marker for the Asian market — has risen almost 5 per cent over the past month and headed close to $54 a tonne this week, according to Argus, a price reporting agency. However, it remains well below the 2008 peak of $180 a tonne.

The rally has surprised analysts who had been expecting another tough year for seaborne, or exported, thermal coal, which is used in power stations to generate electricity and is a major source of income for mining companies such as Glencore.

While the recent recovery in prices owes much to a weaker dollar and rising oil prices, which has eased some of the deflationary pressures that have plagued the industry, other factors have also been at work. These include output cuts from producers in Australian and Indonesia as well as a significant fall in domestic supplies in China. […]

In spite of the recent rebound, most analysts remain bearish on thermal coal, saying the long-term outlook remains bleak because of environmental concerns and the growth of the liquefied natural gas market.

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