Where is the price of coal going ?
As the price of this asset depends a lot to the natural gas price and oil price, it’s hard to make previsions about the Gas-Vegas and Crude-Vegas “trends”. If we want to have an idea about what is going on with the price of coal, we must first take a look to the Oil price and the Nat Gas price. Both these commodities are in a down trend. Adding more pressure to the price of coal is the Chinese slowdown of the economy and the consequent demand. New regulations in Europe and the US about the limitations of the coal use, in the coal fired power plants, have also had an impact on the price of coal.
In Europe the price of coal has almost reached $58 per ton at the Rotterdam and Amsterdam ports. In the Asia/Pacific area, the last price of cargos, were settled at around $61 per ton at Australian ports. As China and India have reduced the imports of coal, the biggest thermal coal exporter in the world, Indonesia, has difficulty to place its most important asset. In the US market, the central Appalachia price was fixed at $52.75 per short ton.
The United States coal market is specific, the coal is not a substitute of the oil in thermal plants but these commodity prices are still much correlated because of the costs of transportation around the country. As the oil price affects the cost of transport, the lower the price of oil is, the stronger will be the concurrency to transport the coal, at lower prices.
The forecasts for the coal price continue to remain in the down side, as the new agreement between the western countries and Iran will allow the ayatollah country to put around 1 Mln more barrels per day in the international markets of oil. This will have a significant impact on the market price and will further contribute to push it down.
Unless we see a strong return in demand from China and the Us, we can expect the price of coal to remain low for some more time. Many media are talking about a collapse of the coal extracting industry and this could probably be right in the short time but don’t forget that we are also talking about a commodity asset and these prices can move ahead aggressively in any eventual political and social crises.