Coking Coal Price to Fall on Softer Demand, Mackenzie Says

Wed, Oct 19, 2011

Steelmaking coal prices will fall below $240 a metric ton by the fourth quarter of 2012 as demand eases and supply improves following flooding in Australia, forecaster Wood Mackenzie Ltd. said.

“Prices have started to fall from the last quarter and will continue to decline due to softening demand and the recovery of supply from flood-hit basins earlier in the year,” Prakash Sharma, coal market analyst at Wood Mackenzie, said in an e-mailed statement. “Leading industrial indicators suggest a sharp deterioration in manufacturing activity - reflected by the decline in global steel production.”

Contract coal prices settled at $285 a ton for the current quarter, 10 percent lower than the previous three months, and after reaching a record following flooding at the start of the year in Australia, the world’s biggest exporter.

The longer-term demand outlook remains strong, which will likely trigger further takeover activity in the sector, Sharma said.

“Demand growth will be led by emerging markets, with Asia accounting for 75% of global metallurgical coal demand by 2030,” he said. “China and India will be key demand drivers, contributing to 60 percent of Asia Pacific’s total import demand.”

(sourced bloomberg)

US$ 8 billion worth of infrastructure projects in pipeline in Indonesia -Wood Mackenzie

Tuesday, March08, 2011

India’s Increasing Demand for Thermal Coal cannot be satisfied without emerging coal areas in Indonesia - Wood Mackenzie

At Coaltrans India 2011 in New Delhi today, Wood Mackenzie says that emerging coal supply areas in Indonesia will be instrumental to meeting rapidly growing coal demand from India.

Drawing on information contained within Wood Mackenzie’s Coal Supply Service and Global Cost and Margin Tool, Presenter and Coal Research Analyst, Rohan Kendall said, “Indonesia will account for 40 percent of growth in seaborne thermal coal supply over the next ten years, with the emerging coal areas of the South Sumatra basin and Wahau coal field making an important contribution to this growth. There is US$8 billion of infrastructure projects in the pipeline in these emerging areas that will support export growth.”

Emerging coal regions are a good fit for developing economies, such as India, because the basins contain abundant reserves. These areas are experiencing upstream investment as Indian power generators such as Reliance and Adani look to secure coal supplies for new power stations. There are currently several ultra-mega power plants being built in India with a capacity of over 4,000 Megawatts each; and still more are planned. The projects currently in development are similar in capacity to those in China and are expected to be operational between the second half of 2011 and 2014.

Kendall expands, “Coal production costs are low in emerging basins in Indonesia, which is why they are attractive to Indian power generators. The costs of investing upstream to secure coal requirements are much lower than Indian power generators would otherwise pay if they were to purchase all of their coal on the seaborne market. Also, for power stations that are being built on the coast, it is more realistic to seek seaborne supplies which do not depend on India’s rail network for transport.”

Wood Mackenzie says in order for emerging thermal coal supply areas to fulfil their potential, infrastructure challenges need to be overcome. Kendall says, “There is currently insufficient infrastructure in these areas to support large scale coal exports. There are numerous projects proposed which combined would add 140 million tons per annum (Mtpa) of capacity. We believe that some of these are unlikely to progress given regulatory challenges.”

In summary, coal supplies from emerging basins in Indonesia are expected to increase strongly over the next ten years. The large reserves in these areas will be instrumental to meeting India’s future thermal coal requirements. Coal from emerging areas is cost competitive with established basins but the main question remaining is when and how the infrastructure issues can be overcome to bring the coal to market.

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Tags : Indonesian coal traders, suppliers, exporters, miners