Coal prices bound for the floor

A brief rally in coal prices has again floundered, with the
value of coal from the Newcastle port dropping to $68 per tonne.

Hopes were allowed to build after the recovery in January
and February this year, when prices surged 30 per cent from $60 per tonne to a
peak of $80 at the end of February.

However the price has already tumbled back down to $68 per
tonne.

Reuters
reported
the price surge was related to Chinese demand for cleaner
Australian coal in response to pressures of air pollution, export cuts from the
US and output cuts from Glencore, as well as a 30 per cent rise in the price of
oil.

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.

China’s coal imports will be trending more towards higher
quality from Australia, as they lean away from ‘dirty’ brown coal and seek to
meet their pollution targets.

Glencore
announced
earlier this week it will cut production by 15 per cent or 15
million tonnes, sacrificing product which CEO Ivan Glasenberg described as “profit
making tonnes”.

“We don’t want to be the ones forcing the price down with
oversupply,” he said.

Analysts are reportedly forecasting a market floor of $60 per tonne.

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