​Australia slated to become largest coal exporter

Australia will resume its position as the world’s largest coal exporter, taking the title back from Indonesia.

In the latest Resources and Energy Quarterly, published by the Department of Industry, it highlights Australia’s continuing dominance of the sector, with the country predicted to move back into the top position by 2017.

This in spite of Australia currently being only the fifth largest coal producer.

Much of this will be supported by continued demand in Asia are the region continues its process of wider industrialisation and urbanisation.

This ‘underpins the positive outlook for Australian coal,” the Minerals Council of Australia said, “with our metallurgical coal and thermal coal playing an integral role in meeting steel making demand and the provision of affordable and reliable base load energy”.

Queensland has been leading much of this export push, having recorded a consistent series of record coal export levels.

The state saw almost 216 million tonnes exported in 2014, higher than previous guidance, and a consistent rate of growth from 168 million tonnes and 196 million tonnes in 2012 and 2013 respectively.

Globally the metallurgical coal trade market is forecast to increase by 2.3 per cent to 316 million tonnes this year.

While China’s imports declined by around 16 per cent to 65 million tonnes last year, it is forecast to return to an increase, jumping by six per cent this year.

India has been filling the demand gap as its coking coal demands increased by 18 per cent to 44 million tonnes in 2014, and expected to continue this upwards trend at an average of 2.2 per cent annually to reach 57 million tonnes in 2020.

However, despite Australia taking the top exporter mantle, things are still looking bleak ahead for coal prices, particularly thermal coal.

Coal futures have fallen to near decade lows, following a short abortive rally.

The API2 2015 coal futures have fallen, dropping below US$60 for the first time since January 2006.

In the wake of this the ANZ Bank has dropped its forecast for Japanese contract prices from $75 per tonne to $70, while NAB has called $72.50, a significant drop from last year’s March price of $81.80 per tonne while most analysts are reporting the current levels as the market floor.

Prices may hurt even more as Chinese demand tapers off after

the country announced plans to reduce consumption levels by 160 million tonnes over the next five years.

Much of the coal market is looking to reduce output or sell off underperforming coal mines to address market oversupply and return strength to the coal price, even as Rio Tinto increases its saleable reserves at its massive hail Creek coal mine.

Anglo American has flagged the sale of two of its coal mines, Callide and Dartbrook, telling Australian Miningin terms of its broader coal portfolio everything is currently under review and the outcome of that review is still to be determined.

The move is part of a company-wide coal shakeup which will also see the review of South African operations.

According to Anglo American CEO Mark Cutifani coal mines will be closed or suspended at a steady rate until reduced supply drives a price recovery, adding that globally they will most likely shut at a rate of around one every two to three weeks until the lack of supply finally affects price.

Glencore is operating in the same vein, having reduced output over Christmas by 15 million tonnes by temporarily closing operations.

According to the miner it was "a considered management decision given the current oversupply situation".

Glencore said this will reduce the need to push incremental sales in the weak commodity price environment.

“We don’t want to be the ones forcing the price down with oversupply,” Glencore CEO Ivan Glasenberg said earlier this month

The miner has also announced the possibility of closing its South African coal operations.

However it is not all bad news.

BREE said from 2016 the market balance is expected to tighten as more mines close and availability tightens.

This will result in contract prices rising to US$86 a tonne by 2019.

According to analysts the falling dollar is also likely to insulate margins in Australia.

“Modest productivity gains, the rapid fall in oil prices and currency devaluation in Australia and Russia will help lower costs. Therefore, Australian mines stand in a relatively strong position compared with higher cost suppliers – particularly those in the U.S.,” Wood Mackenzie said.

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