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Thermal coal prices to stay low,[link widoczny dla zalogowanych],[link widoczny dla zalogowanych]
Global thermal coal prices may continue to remain at lower levels till early the coming year as a result of drop sought after from India and china,[link widoczny dla zalogowanych],[link widoczny dla zalogowanych], said a Fitch set of Wednesday.
The buying price of thermal coal (5,[link widoczny dla zalogowanych],[link widoczny dla zalogowanych],500 kcal coal at Newcastle Australia on the free-on-board basis) hit a two-year low of $87 (Rs 4,[link widoczny dla zalogowanych],785) a tonne in June from $142 a tonne recorded in January last year.
Aside from the economic slowdown in India and China,[link widoczny dla zalogowanych],[link widoczny dla zalogowanych], the prices were hit by a rise in production and exports from Indonesia and Australia. Exports from the US also jumped because of cheap gas replacing coal used in power generation,[link widoczny dla zalogowanych],[link widoczny dla zalogowanych], it said.
Coal prices could recover if demand from key importers India and china improves. India reliance on imported coal has increased as domestic production continues to be hit. In China,[link widoczny dla zalogowanych],[link widoczny dla zalogowanych], thermal coal fired power represents a lot more than 70 per cent of the nation energy needs. Thermal coal demand from China would lift again carrying out a sufficient policy easing through the Government,[link widoczny dla zalogowanych],[link widoczny dla zalogowanych], it said.
SUPPLY SIDE CONCERNS
The weak pricing environment is exposing the company risks of high-cost coal producers,[link widoczny dla zalogowanych],[link widoczny dla zalogowanych], as coal prices fall near or below the marginal price of production. Many Australian producers have high cash costs of production. Such operators is going to be significantly affected if prices remain low to have an extended period.
Simultaneously,[link widoczny dla zalogowanych], sustained low coal prices could shift buyers from low-rank coal to higher-grade coals and,[link widoczny dla zalogowanych], thus,[link widoczny dla zalogowanych], negatively affect both demand and also the realised prices for low-rank coal,[link widoczny dla zalogowanych], said Fitch.
Should the current low price environment persist into 2013,[link widoczny dla zalogowanych],[link widoczny dla zalogowanych], Fitch expects high-cost producers in Australia and the US to attempt production cuts,[link widoczny dla zalogowanych],[link widoczny dla zalogowanych], and review expansion projects under consideration. Fitch also believes that production expansion plans by low-cost producing countries for example Indonesia might be curtailed. Such actions would limit coal production levels and help address oversupply.