While we’re all focused on the iron ore price, the two coals – thermal and coking – combine to also be very significant to Australian export income (some 24% of the RBA’s new commodity index) and both have been quietly sliding in past days.
From ANZ today:
Thermal coal ended the week down 3% to USD87.5/t, weighed by softening bids by Chinese buyers. Price negotiations with Japanese utilities continue, with Xstrata making an offer at slightly over USD100/t. Nevertheless, bids have been in the low USD90s/t. Negotiations are likely to continue through April. In coking coal markets, prices continued to remain weak, falling 1.5% to USD161/t. On Friday, China’s Dalian Commodity Exchange launched the world’s first coking coal futures, with 848,922 lots traded on the first day. The September contract ended the day lower at USD167/t, dampening activity in the physical market as traders are now expecting physical prices to fall in tandem with a decline in futures. Meanwhile, iron ore prices regained some footing to end the week up 0.5% at USD135.3/t.
Thermal coal is only just above its recent lows at $86. Coking coal is still $10 above:
Since recent rebound highs, the two coals have stripped about 4% from Australia’s terms of trade. Iron ore is down 15% and removes another 5% from the terms of trade. That’s 9% knocked off in the past few weeks.
With the mining boom operating on longer term price horizons you would not expect this recent volatility to immediately impact investment. But it seems likely that these price ranges and lower are the new normal for the bulks. That will mean further pressure ahead for investment plans, further pressure on national income and nominal growth and further pressure on corporate profits and tax revenue.
ANZ Commodity Daily 802 250313 by Heidi Taylor
