thermal coal prices hit two-year low

Probably not helping BND's cause

The surge in supply comes as Chinese importers of thermal coal asked traders to defer cargos and
– in some cases – defaulted on their contracts. Chinese coal imports, nonetheless, are running well
ahead of the levels of last year, traders said.
The slide hit the share price of thermal coal miners, particularly in the US, with the valuation of some
companies falling to the lowest in more a decade. Industry executives believe the coal market is
ripe for a round of mergers and acquisitions as the share prices of medium-sized companies
plunged further. The share price of Arch Coal, a US-based medium size coal miner, hit the lowest
since 2002 at less than $8, down from a record of nearly $80 in 2008.
The outlook for thermal coal prices is important for mining companies such as Bumi, Xstrata, Anglo
American, Peabody Energy, and traders including Glencore and Noble Group, whose profitability is
closely linked to the commodity.
The price of thermal coal in the Australian port of Newcastle, a benchmark for the Asian market, fell
to $87.30 a tonne, the lowest since June 2010 and down 21.5 per cent from January. Coal prices
set an all-time high of more than $200 in mid 2008.
“There is blood in the water,” said a senior European-based coal trader.
Daniel Brebner, mining analyst at Deutsche Bank, said prices were reaching the level at “which we would begin to expect a meaningful
support from a production response”. Coal executives believe that as
much as 10 per cent of the production serving the seaborne market
could be losing money at current prices.
US utilities are consuming less domestic coal as they shift to cheaper
natural gas, triggering a wave of exports that is depressing the
Atlantic coal market.
According to the US Department of Energy, the share of electricity
generated by burning coal in the US has fallen to its smallest in nearly
40 years amid historically low natural gas prices and the warmest
March on record for much of America. Coal’s share in electricity
generation fell in March to 34 per cent, the lowest level since January
1973, the DoE said.
US coal miners are responding to the drop in domestic demand by
exporting record amounts of coal. Paolo Coghe, commodities analyst at Société Générale in Paris,
estimated that US net coal exports for the whole of 2011 were double those in 2008. “These
volumes have impacted the Atlantic basin trade,” he said.