ASIAN MINERS QUIETLY TIGHTEN COAL MARKET

Indonesia and Australia production fell to 566m tonnes last year

AUSTRALIAN and Indonesian miners have quietly done in the last two years what the Organisation of the Petroleum Exporting Countries (Opec) has been shouting about: tighten coal markets and prop up prices.

The informal coal output reductions, unlike the official cuts in place since January led by the Opec, are culminating right as Asia enters the Northern Hemisphere winter when heating demand peaks in January.

Additionally, there are warnings a La Nina pattern that typically brings colder-than-normal weather to the Northern Hemisphere might occur.

In 2015, at the peak of the coal glut, Glencore, the world’s biggest thermal coal exporting firm, said it would start cutting exports by scaling back some open pit mining and deferring investments in Australia in order to tackle oversupply. Indonesian mines were quick to follow.

Production from Indonesia and Australia, Asia’s biggest thermal coal suppliers, dipped from almost 600 million tonnes in 2013 to 566 million last year, according to government and industry data.

Meanwhile, demand from North Asia’s main consumers China, Japan, South Korea and Taiwan has risen by five per cent since 2015.

David Thurtell, resource economics manager for Australia’s Department of Industry, Innovation and Science said the country’s supply had dropped by between one million and two million tonnes this year, enough to “tighten up the market and firm up pricing against a pretty solid demand background”.

Asian benchmark thermal coal prices for Australian Newcastle cargoes have doubled since mid2016 to highs of over US$100 (RM412) per tonne this year.

Shares of specialist miners like Glencore, Australia’s Whitehaven Coal, and Indonesia’s Adaro, have surged since last year on the higher coal prices.

While coal markets tightened during last year and this year, a gradual increase in output might change that next year, said analysts.

“Prices will ease over next year and beyond as Chinese demand for coal falters and the global market is better supplied by increases in output from major producers,” said BMI Research in a note.

Indonesia, the world’s biggest thermal coal exporter, is increasing supplies after years of cutting back. Reuters