Target $18.72, page-10054

The Coal Trader

Panic! At the Met Coal...

What a week to schedule a vacation! China steel producer Baowu said today that the country’s steel industry is facing a "long winter" that may last longer than expected, and that has caused met coal markets to take another leg down. With healthy balance sheets and declining price-related costs, most mines are still positive margin down to $180-190/tonne PLV.

But once SG&A/CAPEX start to eat into cash balances, production cuts will begin to occur on both the coal and steel sides, and that’s probably what we need to see to put in a cycle bottom in the entire sector.

But given that export volumes have remained robust even as price has fallen, either more buying from India or a supply disruption (or both!) can help stop the bleeding in the short term. Gonna be a few more weeks still before that happens, so no need to back up the truck here even despite the attractive prices.