* Short-term price outlook remains weak, but gains seen in
* Price rise since Oct. adds 50 mln tonnes to export market
By Henning Gloystein
LONDON, Dec 7 Rising coal prices are restoring
profitability to high-cost Australian mines that were making a
loss due to an oversupplied global market earlier this year, and
prices are set to rise further in 2013, Deutsche Bank
said on Friday.
Healthy coal exports from major producers such as Australia,
Indonesia, South Africa and Colombia have been met with poor
demand in key markets such as Europe and China.
This caused a decline in coal prices this year that led
expensive mines to produce at a loss, but prices have been
recovering since the end of the summer.
"The rise in spot prices since October will have restored
profitability to marginal Australian mines, relieving the
pressure on producers to moderate short-term volumes, and
improving the outlook for the March contract negotiation,"
Deutsche Bank said in a research note.
European physical spot coal prices dropped from around $130
a tonne at the beginning of 2011 to below $83 last October, but
prices have picked up to over $90 a tonne since then.
"According to our estimates, the rise in prices since late
October has restored profitability to as much as 42 million
tonnes of Australian export thermal coal production, and 7
million tonnes of Russian export thermal coal production," the
Deutsche Bank said that high Chinese coal inventories and
mines returning to production would be headwinds for further
price rises in the short-term, but added that it expected coal
prices to rise over the course of next year.
"We believe that fundamental drivers will improve over the
course of 2013 as U.S. gas prices stabilise at a higher level
and Chinese economic activity accelerates towards the trend rate
of growth in the second half of the year."
A sharp drop in U.S. gas prices on the back of the North
American shale gas production boom has made natural gas more
attractive for power generators in the U.S., leading to American
miners to export their coal to European users, adding to an
already oversupplied market.
But Deutsche Bank said that higher gas demand in the U.S.
would push American gas prices up, leading to a reduction of
U.S. coal exports, while Chinese demand for coal imports would
rise, further supporting coal prices.
"Therefore, while the outlook in the next month is
ambiguous, the second half of 2013 provides clearer signals for
an improvement in thermal coal fundamentals next year," the bank
(Editing by Alison Birrane)