Watch for the prices of some major miners today in Australia, there could be some big gains, especially for coal exporters.
The long slump in coal prices is coming to an end judging by the dramatic rally seen in the past few weeks, especially for the premium steel making grades of coal.
Iron ore is still trading a round $US55 a tonne in the Chinese market, despite claims from many analysts that it would have fallen back to around $US40 a tonne by now. The price is up sharply from the lows of late 2015 and early this year.
And in the past month the price of coking (metallurgical) coal has joined iron ore, surging more than 40% to the highest levels since early 2013.
As with iron ore, it’s rising demand from China which is driving the demand and that will benefit Australian companies such as Whitehaven, BHP Billiton, Wesfarmers with its coal mines in Queensland and NSW, the bankrupt US miner, Peabody, Glencore (which is trying to sell its mines in Australia, or some of them), Anglo American (which is selling its mines in Australia) and a host of smaller players who have been hanging on waiting for a rebound to happen.
China has ramped up its efforts to buy up coking coal for its mammoth steel industry, despite excessive capacity in the coal and steel sectors in China itself.
The price for premium coking coal exported from Australia, the world’s biggest shipper of the commodity, jumped to $US158.40 a tonne Tuesday, according to the Steel Index, a price information provider.
That was up 4.1% from Monday and more than double the $US78 a ton sellers were getting for their coal at the start of this year. Tuesday’s price was the highest since March 18, 2013, when the commodity traded a little over $US159 a tonne.
The rally has broken a five-year downturn in prices globally that sparked widespread layoffs and resulted in some coal mines closing or cutting production.
Thermal or steaming coal prices are being dragged higher as well by the demand (it is interchangeable with lower grading metallurgical coal and the difference is determined by the amount of washing done before export. Coal that is washed is coking coal, unwashed or lightly processed is thermal coal).
The Newcastle price for steaming coal was $US69.95 on Monday of this week, up 38% from the low of $US49.50 in early February.
Commonwealth Bank economist John Peters said yesterday in a note about the current account data for the June quarter, that the huge falls in commodity prices since the end of the resources boom could be over, with bulk commodity prices set to pick up.
"The large falls in bulk (iron and coal) export prices in recent years have driven the terms of trade ever lower, which has in turn retarded national income and nominal GDP growth," Mr Peters said in a note.
"There now could be some light at the end of the tunnel and the long national income drought may be in the early stages of passing." The terms of trade, the ratio of export prices to import prices, rose by 2.3% in the three months to June 30.
