Two reports out today have painted different pictures of the thermal coal market.
First, one of Australia’s largest coal mining companies, New Hope, announced that it expected further falls in production and sales this year after it scaled-back production in response to weak export prices. The firm’s net profit also halved in the year to July, with revenue falling by 15%.
The announcement follows a spate of job losses, mine closures, and cancelled expansion plans across the Australian thermal coal industry, amid weakening demand for hard commodities and increasing competition from the US and Indonesia, which has seen thermal coal prices decline by nearly 20% this year.
On the other side of the ledger, Morgan Stanley has today released research arguing that the global thermal coal market is showing signs of rebounding, namely:
- US coal exports are declining, reducing supply (see first chart below);
- Chinese electricity production has strengthened every month since April, raising demand (see second chart below);
- Chinese hydro electricity generation is lower than the past two years; and
- Supply growth could slow as producers scale back investment.
