Prelude sets sail, Australian government moves to restrict exports

The Australian Government has implemented a gas export restrictions policy, the Australian Domestic Gas Security Mechanism (ADGSM), to try to alleviate public and industry concerns regarding domestic gas supply availability in the eastern states. The policy presents a number of risks for gas producers, LNG buyers, as well as domestic gas buyers. In this opinion piece, Saul Kavonic provides an overview of risks and unintended consequences the policy may pose for stakeholders and policy makers.

Widespread mine safety checks in Shanxi have constrained production again in China, pushing domestic coal prices to new highs, with more likely to come. Chinese buyers have actively sought seaborne coal again this month, with hot metal and coke production still very high. Prices for premium hard coking coals have surged through US$200/t, and could go higher in September. International miners are doing what they can to meet demand, but are struggling to meet the need for greater imports into China, the EU, India and Brazil. However, slowing Chinese steel demand, and environmentally-driven production cuts at steel and coke plants from as early as October, should see a softening in coal demand and lower prices towards year end, and into Q1 2018. Average 2018 prices will be lower than this year, but we have increased our price forecast to over US$145/t for next year to account for continued high coal demand in China, and greater constraints on Chinese coal supply.