Declining coal prices to hit producers even harder

Declining coal prices to hit producers even harder

Coal producers around the globe have been feeling the effects of falling coal prices, with Aussie miners being the hardest hit, as the sector continues to lay off workers and suspend operations.

Unfortunately their troubles seem far from over, according to experts such as Macquarie Research, which predict the lowest thermal coal price settlement between Australian producers and Japanese customers since 2009 is around the corner.

They also warn, reports The Australian, that contract prices will continue to fall amid a long-term structural decline in demand.

The value of thermal coal used in power generation and coking coal for steelmaking have been falling since 2011 as new mines planning to capitalize on earlier high prices began to move into production. They have been affected also by a declining demand from Asia, which is partly due to China’s efforts to clean up heavy pollution.

Declining coal prices to hit producers even harder

Australian coal production (red) and exports (black), 1980-2012. Source:Wikipedia

The drop have forced miners such as BHP Billiton and Anglo American PLC to review their operations, resulting in staff cutbacks, shelved expansion plans and asset sales. BHP, which through its partnership with Mitsubishi Corp. is the world's largest coking-coal exporter, has already closed several mines, including its Norwich Park and Gregory operations in eastern Australia citing weak prices.