No end in sight for the woes of world’s coal mines

COAL’S longest price decline in at least seven years shows no sign of ending as producers from Australia to Russia are not cutting output, according to a seller partly owned by Glencore.

By maintaining sales volumes, miners are banking on being the first to benefit from a revival in demand, according to Howard Gatiss, the chief executive of Coal Marketing, a marketer of coal from Colombia’s Cerrejon complex in the country’s northeast. Prices for the fuel have fallen to the lowest since at least 2007 amid a 40 percent slump in demand from China, the world’s largest consumer of raw materials.

Record shipments may turn a deficit in the seaborne market last year into a surplus in 2015, according to Deutsche Bank. Alpha Natural Resources and Walter Energy are among at least eight US miners that filed for bankruptcy protection this year as overcapacity, a slowing Chinese economy and lower natural gas prices eroded market share. US coal production fell to its lowest since 1984 in June, according to the Energy Information Administration.

“There’s been a general feeling for some time that we must be toward the bottom, so nobody has made the drastic production cuts that we have started to see in the US,” Gatiss said last week in Dublin.

2016 outlook

The global seaborne coal market may have a surplus of 10 million metric tons in 2015, compared with a 36 million-ton shortfall in 2014, according to Deutsche Bank. Analysts forecast world prices would increase in 2016, according to data compiled by Bloomberg.

European year-ahead coal fell 0.5 percent to $53.70 (R687.73) a metric ton yesterday in London, according to broker data. The regional benchmark has fallen more than 70 percent since its 2008 peak.

Producers in countries from Australia to Colombia have seen local costs decline as their currencies weaken against the dollar. The Bloomberg Spot Dollar Index has risen 19 percent in the past 12 months. Coal is traded internationally in the US currency.

Australia exported 98 million tons of coal in the first half, up 3.8 percent from a year earlier. Russian shipments dropped 3.1 percent to 73 million tons in the first half. Glencore, Anglo American and BHP Billiton have equal stakes in the Coal Marketing Company, according to its website.

Australia is in the strongest position among coal exporters, as it has the most stable political outlook and a government that is committed to supporting extractive industries, according to Gatiss.