From Macquarie today, much along he lines of my own thinking:
Since the announcement of prolonged Queensland rail outages in the aftermath of Cyclone Debbie last week, there have been a number of coal consultant projections of 2011-style supply outages and $300/t met coal prices. However, we think there are various factors which buffer against this.
To be clear, in the short term the spot price for met coal will certainly go up, and perhaps quite rapidly. We’d expect producers with spare coal to target a scarcity premium in the Indian spot market, given this region is most exposed to Queensland supply. This once again highlights that a commodity such as met coal will always be more exposed to potential supply shocks given its lack of geographical supply diversity vis a vis peers, given ~50% of seaborne tonnage comes from Queensland.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
