How long will coal last after the boom
20 October, 2016, 12:00 am
As Australian thermal coal prices hit $100 per tonne on Tuesday for the first time since 2012, the fuel’s rally is now among the commodity’s top-three bull-runs on record.
The bull-run rivals the 2011 Fukushima nuclear meltdown and Australian mining flood spike, and the 2008/2009 financial boom and bust.
With Australian Newcastle spot cargo prices for November, up almost 100 per cent since June to $100 per tonne, their highest since 2012, traders and analysts say a bust is inevitable.
“Of course it’s not going to last. Rising prices are encouraging Chinese miners to raise output and the government, seeing how much prices have risen, has backed down somewhat and asked for an increase in production,” said Ralph Leszczynski of shipping brokerage Banchero Costa.
While Newcastle prices are unlikely to drop back anywhere near annual lows, head of research at Marex Spectron Georgi Slavov believes there is a $20 premium that could be wiped out.
“I certainly believe we are at the top — coal will kill this rally by itself,” he said in reference to higher prices stimulating greater production growth.