The current surge in coal prices has signalled positivity in the resources sector, leading to announcements of mines reopening both in Australia and overseas.
Last week the coking coal price reached $230/tonne, soaring from the $75 mark a few months prior, according to the Financial Times. Thermal coal also had a hike in price, reaching more than $100/tonne, and ending a five-year bear market where prices dropped to as low as $40.
The price increase follows China’s decision to reduce coal mine production from 330 days a year to 276, decreasing production by 10 per cent compared this year.
This has also sparked a surge in imports, with September coal imports increasing by a third to 24.4m tonnes, compared to last year.
It has also had coal producing nations awaiting an economic boost as they begin reopening halted mines.
Glencore recently announced the reopening of the Collinsville mine in Queensland, creating 200 jobs in the region. This was welcomed by the state premier Annastacia Palaszczuk who said, “This is yet another piece of positive news for the north and ongoing evidence of green shoots appearing in the resources sector.”
The state is also expecting the reopening of at least three other mines, with NSW planning three as well.
“What we are seeing in the coal industry are companies willing to invest because they see the fundamental drivers of global demand for high-quality Queensland coals as remaining strong,” Queensland Resources Council CEO Michael Roche said.
Since 2011, 500 mines have closed in the US, leaving around 30,000 workers out of a job.
Last month, US company ERP Compliant Fuels purchased three mothballed mines in British Columbia, Canada and is recommencing operations. Another US company, Ramaco, is also planning to restart two coking coal mines this year.
Whitehaven has also noted a ramp up of production following the surge in price, having quadrupled production in four years according to chief executive Paul Flynn.
The company’s September quarter results recorded an increase in coal output, attributing it to strong demand and China’s crackdown on production.
Flynn also went on to suggest that if prices stayed at $75 for a sustained period of time, miners may begin to invest in new mines.
However, other groups believe the rally will be short lived, with analyst at the Institute for Energy Economics and Financial Analysis, Tim Buckley, saying the seaborne trade is in structural decline and global coal demand will drop by 2.3 per cent this year.