Mining and Heavy Industries

Coal prices bouncing back

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The reported signing of a US$200 a tonne metallurgical coal benchmark deal between Peabody and Japan’s Nippon Steel has signalled a drastic improvement in the outlook for the coal sector.

The deal, reported in multiple sources, is for North Goonyella coal, to be sold for US$200 per metric tonne in the fourth quarter of 2016. That’s up from a third quarter benchmark of $92.50 per metric tonne.

The price news comes after several shuttered mines in Australia’s east coast coal market were reopened, including Glencore’s Collinsville mine, which the miner announced it would reopen this week.

Glencore shut the mine in 2015, citing declining coal prices.

But the mine, and its 230 workers, will be back to work, in a move welcomed by Queensland Premier Annastacia Palaszczuk.

“This is yet another piece of positive news for the north and ongoing evidence of green shoots appearing in the resources sector,” the premier said on October 11.

“It’s been encouraging to see these green shoots appearing over the past few months showing in both global prices and within the industry itself in Queensland.”

The resurgence in coal prices has reportedly left some steelmakers displeased.

One Atlantic steelmaker, according to Platts, suggested the likely outcome of the price swing would be lower production in due course.

Metallurgical coal prices this week have surged well above US$200 a tonne in recent days, and thermal coal – used in power generation – has risen in price by 60% over the last four months.

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