Metallurgical coal, the kind of coal needed to produce steel, has fallen to levels not seen since 2004, according to new information released last week and reported in The Wall Street Journal.
Reports by Doyle Trading Consultants and trade publication Inside Coal have Japanese buyers signing quarterly contracts with Australian suppliers for $93 a tonne. WSJ notes that met-coal has fallen 70 percent from highs of $330 a tonne in 2011, due to a confluence of new supply flooding the market combined with a sustained lag in Chinese demand.
Meanwhile Bloomberg reports that growth in electricity consumption in China has stalled, mostly due to a slowdown by heavy industry which is normally responsible for increases in power consumption commensurate with economic growth. That is having a direct effect on the nation’s coal producers, 80 percent of which are in a loss position.
For years those in the mining and energy industries thought that China’s double-digit growth which fuelled the mining supercycle and kept oil prices elevated would continue far into the future.
But a report released earlier this month shows China’s move away from industrialization and construction to consumption and services is happening much quicker than previously thought.
China’s economic growth is expected to slow to 7% in 2015 and may even slip below that – the slowest pace since 1990.