Booming thermal coal
price on China demand cheers miners
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[August 17, 2017]
By Henning Gloystein and Jim Regan (Australia)
SINGAPORE/SYDNEY (Reuters) - Australian
thermal coal prices for spot cargoes above $100 a tonne, lifted by
reports of strikes and strong Chinese demand, are providing a boost in
earnings and share prices for miners like Glencore and Whitehaven Coal.
A crackdown on illegal mining and pollution in China has curbed domestic
supplies, just as a heat wave and lower hydro power output have boosted
demand for coal for power generation, forcing up prices.
A similar squeeze in 2016 pushed prices to $114 a tonne and miners are
again eyeing windfall profits, despite warning that the market is
"Coal demand remains strong, especially in Asia," said Paul Flynn,
managing director of Whitehaven Coal <WHC.AX>.
"Imports of thermal coal into China have been higher than anticipated,
and when combined with weather related constraints on supply from
Indonesia and some production issues in Australia, have pushed up the
price of seaborne thermal coal."
Reports of more planned strikes at Australia's Hunter Valley mine, as
well as weather-related supply disruptions in Indonesia, have also been
pushing up prices, traders said.
Adding fuel to the already hot market, a huge gas-fired power outage in
Taiwan this week has triggered emergency orders from coal-fired power
stations scrambling to fill the electricity production gap, traders
Australian thermal coal shipments hit a 2017 high in July of over 11
million tonnes, shipping and trading data in Thomson Reuters Eikon
shows. Despite a dip in shipments earlier this month, traders say orders
for the rest of August and into September are high.
Spot cargo prices for Australian thermal coal cargoes from its Newcastle
terminal have jumped by over 40 percent from their 2017 lows. Coal
topped $100 in early August and last closed at $101.25 per tonne.
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A girl makes her way to her house located next to the cooling towers
of a coal-fired power plant in Shijiazhuang, Hebei province, China,
January 28, 2015. REUTERS/Kim Kyung-Hoon/File Photo
The soaring demand and prices are a boon for companies like global miner
Glencore, the world's biggest exporter of sea-traded thermal coal, and
Australian miners like Whitehaven, which profited from last year's spike and
have seen their stocks rally since June.
Shares in Whitehaven hit their highest since 2013 on Thursday after it reported
a near 20-fold full-year profit rise to A$405 million ($322 million).
Glencore this month raised its earnings forecast for 2017, citing higher
commodity prices, after it reported a 68 percent surge in first-half earnings.
The key question is whether the current boom will last.
"Chinese coal production continues to fall due to capacity closures ... stocking
hopes that import demand will remain strong in China in coming months," ANZ bank
said on Thursday.
Last year's rally caught the market by surprise and this year's spike has again
defied forecasts, given ample coal supplies and a growing raft of alternative
"Will prices stay above $100 forever? Certainly not. But given the spikes this
year and last, I and many of my colleagues don't want to be caught short again,"
said one trader.
(Reporting by Henning Gloystein; Editing by Richard Pullin and Tom Hogue)
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