Coal Prices may do the Unexpected: Rise

Potential supply cuts have the price of metallurgical coal -the kind used to make steel -poised to do something it hasn’t done since October 2013: rise.The benchmark contract for coal may gain by a few dollars in the second quarter amid speculation that China is curtailing supply amid high costs, Mark Levin, coal analyst at BB&T Capital Markets in Richmond, Virginia, said in a note to clients on Friday. An incre ase would pause a rout that began in 2011 when prices peaked at $330 a metric ton.

Metallurgical coal prices have plunged due to a global oversupply and slowing demand out of China. The collapse has ravaged US coal miners including Walter Energy, Alpha Natural Resources and Arch Coal. All three companies placed big bets on prices remaining high. And all three have filed for bankruptcy in the past year.

Levin said a “significant“ amount of Chinese metallurgical coal is expected to come out of the mar ket because of high costs and the government’s push to close up to 150 million metric tonnes of annual crude-steel production capacity by 2020. If the prices don’t rise, they’ll at least “end up being no worse than flat“, he said.

In calling a potential price gain, Levin also cited Consol Energy’s sale of a mine in Virginia for $420 million. The buyer, Coronado Coal, is backed by Houston-based Energy and Minerals Group. Coronado bought metallurgical coal mines from Cliffs Natural Resources.–Bloomberg

Source: Economic Times; 07 March 2016

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