Coal news and updates

Global coal prices seen at current levels in Jan-Feb

December 23: Indian power generation companies as well as other consumers of imported coal feel prices of the fuel in international markets will move around current levels with slight fluctuations here and there in the coming 2-3 months.

“Fundamentals suggest that prices should be up in January 2015, but a lot will depend on other factors,” an official from a private sector power generation company said.

“Generally, we see a firmness in prices in December-January every year because of the increase in demand from China and Europe for winter stocking and also because of the fact that traders in the paper market try to hike prices, the impact of which is witnessed in the spot market,” the official said.

Low power generation through the hydro route also leads to higher demand for thermal power and all these factors keep a pressure on coal prices in Q4 and Q1 of any calendar year, he pointed out.

Asked if miners in Indonesia or Australia were planning to cut production in view of weak prices, the official said: “I do not see production cuts coming in the near future,” adding that recently there were reports suggesting that Indonesia is planning to increase its production in 2015.

“I do not think that miners either in Indonesia or Australia are under pressure to reduce production in an attempt to jack up prices,” he said.

Explaining why he feels miners are not under pressure, the official said 35% of the production cost of coal in Indonesia is on account of fuel which has come down drastically in recent months due to the sharp fall in crude oil prices.

In addition, there has been a sharp depreciation in the Indonesian currency in recent days, which means their realisations in the local currency have gone up as prices were largely stable, the official said.

So far as Australia is concerned, the official feels though the share of fuel in the cost of production here is lower than that in Indonesia, most miners are under contract to move a certain volume of coal through the logistics network and they would not like to incur penalty for moving less than the promised quantity of coal through such networks.

“In addition, Australia too has benefited due to the depreciation in the Australian dollar as compared to the US dollar,” the official added.

The Indian official further said it has been found that miners generally focus on increasing efficiency whenever there is softness in prices. “This is good time for miners to focus on improving efficiency,” he added.