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Coal price near USD 100 seen gains after best year since 2012

Coal News - Published on Mon, 08 Jan 2018

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Fin24 reported that coal prices are poised to hold gains near the highest in five years as China’s drive to curb overcapacity sustains import demand by the world’s biggest consumer of the fuel, according to UBS Group AG.

Newcastle coal is forecast to average USD 84 a tonne this year as China extends a strategy started in 2016 to reduce domestic output and streamline its industry, according to UBS Group AG analyst Lachlan Shaw. Prices are trading near USD 100 after averaging about USD 87 last year, the most since 2012. Miners are benefiting from the surge, including Australian producer New Hope Corp., which capped its first annual increase in six years.

Melbourne-based Shaw said by phone that “We think China will continue to close capacity through 2018 and into 2019.” Shaw added that “It has already driven better demand for seaborne thermal coal. The Chinese have made good progress but they still have maybe a third, to a half to go in terms of the capacity closure targets.”

By the end of the decade, China is seeking to trim overcapacity by 800 million tons, more than India’s entire 2014 output. While China cuts capacity, it has also pledged to add newer, more-efficient output, potentially capping demand for imports. UBS is the most bullish on prices compiled by Bloomberg. Citigroup Inc. predicts an average of USD 78 a ton this year, while Morgan Stanley sees USD 75 and Australia & New Zealand Banking Group Ltd. estimates USD 70.

Newcastle coal rose 1.1 % on Thursday to USD 95.75 a ton, according to data from Globalcoal. Prices advanced 5.7 % in 2017 for a second annual gain, ending the year at USD 100.10.

Shares in Australian producer New Hope advanced 51 % last year, the first annual gain since 2011, while Whitehaven Coal Ltd. posted a second yearly increase. UBS expects coal prices to stay strong underpinned by China’s industry reforms, but cautions on new mine development.

Shaw said that “Coal prices will likely stay great for a year or two, but we don’t see a significant lift in underlying demand to justify investment in big new mine supply in the near-to-medium term.”

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Posted By : Nanda Koijam on Mon, 08 Jan 2018
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