In Commodity News 15/04/2015
The export decline in China, which is responsible for a drop in demand for Australian iron ore, is unlikely to have any impact on the price of Newcastle coal, according to an industry analyst.
Treasurer Joe Hockey has warned the price for iron ore could drop to as low as $35 a tonne, reducing the nation’s tax income and putting pressure on the budget bottom line.
AME analyst Matt Fusarelli said the market is stable, and Newcastle thermal coal is a highly regarded resource.
“Thermal coal is generally much more stable in terms of its demand profile, and that is because it goes into baseload electricity generation,” he said.
“Whereas iron ore is used in steel production so it moves much more with the investment cycle.
“The investment cycle in China is slowing whereas we haven’t seen the same sort of slowing, nor are we expecting the same sort of slowing for baseload electricity production.”
Figures released yesterday show exports from China fell 15 per cent last month.
The Chinese government this year moved to improve air quality in its major cities by limiting the use of imported coal with more than 16 per cent ash and three per cent sulphur.
Matt Fusarelli said the regulatory changes and the softening in Chinese manufacturing output will not worry Hunter Valley producers.
“Well Newcastle thermal coal is very much a premium thermal coal product,” he said.
“It’s some of the best coal that is available on the global market.
“It’s favoured by Asian utilities because it is clean burning.
“It’s high in energy, and it can be produced at a very competitive cost.
“Our expectation is that there will be continued demand and we do expect the prices for these premium coals to lift.”
