Happy days in coal country: back in the money!

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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.

Table of contents

  • 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

Tables and charts

This report includes 10 images and tables including:

  • 2016 thermal coal price history ($/t)
  • 2016 metallurgical coal price history ($/t)
  • Prakash Sharma, Wood Mackenzie’s Research Director for Coal
  • 2016 Asian FOB cash cost curve (adjusted to Newcastle 6,000 kcal NAR
  • Andy Roberts, Research Director for Global Thermal Coal
  • 2016 ARA delivered cost curve (adjusted to 6,000 kcal)
  • Jaime Correal, Research Director for Coal
  • Matt Preston, Research Director for North American Coal
  • Natasha Tyrina, Senior Research Analyst for Coal
  • Jim Truman, Research Director for Global Metallurgical Coal

What's included

This report contains:

  • Document

    prices final.xls

    XLS 226.00 KB

  • Document

    Happy days in coal country: back in the money!

    PDF 504.18 KB