Insight
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11 Pages

Happy days in coal country: back in the money!


Happy days in coal country: back in the money!

Report summary

The coal mining industry was slow in 2016 to increase production in response to demand stimulation. The slow response caused a substantial increase in seaborne prices. Quickly boosting output is undoubtedly difficult following three years of declining prices during which miners slashed costs to conserve cash. Should producers rehire laid off-staff, redeploy equipment and restart mines that were recently mothballed or idled? They face the difficulty of assessing the duration of the current price spike.

Many factors are at play, but China’s de-capacity policy is clearly at the centre of the issue. As events unfolded, there was a timely shift of the marginal cost supply by portfolio players, an increase in spot-price-driven shipments over previous years, miner inflexibility owing to years of cost-cutting and a producer reticence to expand without clear understanding of the price future. Increasing flexibility to handle price changes is a skill worthy of producer development.


What's included?

This report includes 2 file(s)

  • Happy days in coal country: back in the money! PDF - 504.18 KB 11 Pages, 0 Tables, 10 Figures
  • prices final.xls XLS - 226.00 KB

Description

This Coal Insight report highlights the key issues surrounding this topic, and draws out the implications for those involved.

Participants, suppliers and advisors can use it to look at the trends, risks and issues within the coal industry and gain an alternative point of view when making decisions.

Wood Mackenzie is the only coal industry service provider that offers a market outlook integrated with other sector analyses, including macroeconomics, coal supply, steel markets and gas and power markets.

Our coal analysts are based in the markets they analyse. They work with objective, proprietary data to help you maximise your current and future decision making. From market dynamics to trade patterns, we give you confidence in your strategic planning.

  • Coal to the world: reports of my death are greatly exaggerated
  • China coal supply reforms are a lifeline to the global coal industry
  • Atlantic prices are impacted by events in China, but also by circumstances unique to Europe
  • Colombian coal shipments into NE Asia are “shorting” Europe
  • Seaborne opportunity nearer for the US but domestic markets improving also
  • 2016 Russian production rises but rail car shortages limit growth
  • What were the factors that caused met coal prices to rise so quickly during August/September?
  • Conclusions

In this report there are 10 tables or charts, including:

  • Coal to the world: reports of my death are greatly exaggerated
    • 2016 thermal coal price history ($/t)
    • 2016 metallurgical coal price history ($/t)
  • China coal supply reforms are a lifeline to the global coal industry
    • Prakash Sharma, Wood Mackenzie’s Research Director for Coal
    • 2016 Asian FOB cash cost curve (adjusted to Newcastle 6,000 kcal NAR
  • Atlantic prices are impacted by events in China, but also by circumstances unique to Europe
    • Andy Roberts, Research Director for Global Thermal Coal
    • 2016 ARA delivered cost curve (adjusted to 6,000 kcal)
  • Colombian coal shipments into NE Asia are “shorting” Europe
    • Jaime Correal, Research Director for Coal
  • Seaborne opportunity nearer for the US but domestic markets improving also
    • Matt Preston, Research Director for North American Coal
  • 2016 Russian production rises but rail car shortages limit growth
    • Natasha Tyrina, Senior Research Analyst for Coal
  • What were the factors that caused met coal prices to rise so quickly during August/September?
    • Jim Truman, Research Director for Global Metallurgical Coal
  • Conclusions
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