Coal prices plunge to 12-year low

Singapore: Coal futures have fallen to 12-year lows, hit by soaring production and a slowdown in global buying, including from India and China which until recently have been pillars of strong demand.

 

Benchmark API2 2016 coal futures last settled at $52.85 a tonne, a level not seen since November 2003. The contract is now over 75 per cent below its 2008 all-time peak and more than 60 per cent below its most recent high following the 2011 Fukushima nuclear disaster in Japan.

 

The steady and sharp fall in coal prices has knocked down shares of big mining companies like BHP Billiton, Glencore and Rio Tinto. The price fall follows a rise in output from exporters like Australia at the same time as a sharp slowdown in overseas orders from major importers like the United States, and now also China and India.

 

“Indian coal imports are now under pressure ... Both thermal and met coal imports ran at their weakest annualised rates since October 2014,” Australian bank Macquarie said on Wednesday.

 

“Such a fall might not be just a temporary blip. On the thermal coal side we have seen power plant inventories reach record high levels, domestic production growth improve significantly and demand growth slow,” it added.

 

Thermal coal is used in power plants while metallurgical or met coal is used to make iron ore. Demand from China has also slowed as its economy grows at its slowest pace in decades and the government has started a fight against rampant pollution, to which coal contributes significantly.