Coal burns brightly after 5-year downturn
The price of coking coal, a key steelmaking ingredient, has just topped $300 a tonne for the first time since 2011 as Asian mills and traders scramble for supplies.
Premium hard coking coal rose 6 per cent to $307.2 a tonne on Tuesday, and is now up more than 250 per cent since China introduced curbs — or working day restrictions — on domestic production six months ago.
The rebound marks a striking turnround in fortunes for coal, which has been shunned by investors because of its poor performance and reputation as the planet’s dirtiest fossil fuel. The last time coking coal traded above $300 a tonne was in 2011 when widespread flooding disrupted production in Australia.
The coal market renaissance reflects supply curbs in China, the world’s biggest consumer of commodities. These were introduced in April in an effort to improve the profitability of the country’s heavily indebted coal industry.
They have also boosted the price of thermal coal, burnt in power stations to generate electricity. The fuel has more doubled in the past six months with benchmark Australian material trading at $110 a tonne.
Rocketing prices are a boon for big producers, which include Anglo American, BHP Billiton and Glencore. The rising profitability of their coal mines has boosted cash flow, helping them pay down debt and potentially putting them in a position to resume or lift dividend payments early next year.
It is also causing problems. Anglo American is trying to sell two Australian coking coal mines but is struggling to reach a deal with a bidding consortium because of the dramatic surge in prices.
The latest gains for coking coal came as Indian steel mills rushed into the market to try and secure some of the latest remaining cargoes for shipment in December. A string of disruptions in Australia has reduced the amount of high quality coking coal available in the spot market, forcing prices and creating a scramble for supplies.
Miners and analysts do not think the price surge can continue for an extended period of time, however, because it will trigger a supply response from mines mothballed during the five-year bear market in coal.
Glencore announced last week it would restart production at the Integra underground mine in New South Wales, Australia, saying it expected to mine 1.3m tonnes of material. A number of other mines in the state and neighbouring Queensland also have plans to reopen.
Chinese policymakers have also started to fret about the coal market surge because of the impact it could have on domestic power prices.
At the end of September, China’s state planner National Development and Reform Commission relaxed production controls at 800 mines, a move that could theoretically increase output by 300m tonnes, according to analysts. In addition, the Zhengzhou Commodity Exchange has raised fees several times in a bid to curb speculative buying of coal by retail investors.
“All of these factors suggest thermal coal prices should start to roll over,” said analysts at Macquarie in a recent report.
However, it could take time for China’s thermal coal miners to increase production while supplies of coking coal from Australia have yet to pick up after recent technical problems at the coal face.
https://www.ft.com/content/5c82dbbe-a5d0-11e6-8b69-02899e8bd9d1
NTPC to generate 10 gw solar energy by 2022, vows CMD Gurdeep Singh
State-owned NTPC on Tuesday said it is is well on course to meet its target of generating 10 GW solar energy as part of the government’s aim of 100 GW by 2022 .
“NTPC’s commitment to add 10 GW solar energy out of government’s overall commitment of 100 GW (Solar) is well on target for 2022,” company’s CMD Gurdeep Singh said in a statement here.
He also stressed on maintaining PSU’s market leadership in the power sector through increase in renewable portfolio, while optimising the operations of existing fossil fuel fleet.
He said that more than 90 per cent of NTPC’s current coal-based capacity addition are low carbon footprint, high efficiency and SC (super critical)/USC (Ultra Super Critical) units. Ministry of Environment & Forest Secretary A N Jha referred to the dilemma of NTPC as a responsible power generator to find ways of providing power to feed the development needs of 1.2 billion people in India and also ensuring minimum damage to the environment.
Jha said technology holds the prime space in all development initiatives and is the most appropriate theme. He praised NTPC’s contribution for improving the Carbon sink by planting one crore saplings.
Technology imperatives of the power industry in India is to be able to drive sustainable growth while reducing the carbon footprint and pursuing the best possible cost effective technologies to provide efficient, reliable and economically viable energy to support the GDP growth, CEA Chairperson S D Dubey in his address said.
NTPC Director A K Jha spoke of perspectives for the PSU in the Indian market context and informed that although India is likely to meet the long term IEA projections on Energy Demand & Supply, the current mid-term will see a substantial increase in coal-based generation in addition to renewables.
Shri A. N. Jha, Secretary (MoEF) Ministry of Environment & Forest referred to the dilemma of NTPC as a responsible Power Generator to find ways of providing power to feed the development needs of 1.2 billion people of India and also ensuring minimum damage the environment while inaugurating NTPC’s Third International Technical Summit
“Redefining Power Generation Landscape.” Shri Jha said Technology holds the prime space in all development initiatives and is the most appropriate theme. He praised NTPC’s contribution for improving the Carbon sink by planting 1 crore saplings.
Shri S. D. Dubey, Chairperson, CEA; Shri A. S. Bakshi, Member-CERC; Shri A. K. Singhal, Member-CERC Shri M. K. Iyer, Member-CERC; Shri Gurdeep Singh, CMD NTPC, Shri A.K. Jha, Director (Tech), senior officials, International as well as Indian Delegates were present on the occasion.
http://www.millenniumpost.in/NewsContent.aspx?NID=332373
ArcelorMittal sees weak last quarter as coal spike hits margins
ArcelorMittal warned of slower earnings this quarter citing higher coal prices and lower U.S. steel prices after the world's largest steel producer missed core third-quarter profit expectations on Tuesday.
ArcelorMittal shares, which have risen by about a quarter since September, were down some 4 percent in early trade.
"We're all surprised by the rapid and unexpected rise of coking coal," Chief Financial Officer Aditya Mittal told a conference call.
Mittal said coal prices have risen due to some U.S. mines stopping operations and a cap on production imposed by the Chinese government as part of a shift to clean power.
Prices for Australian premium hard coking coal .PHCC-AUS=SI have surged to $250 per tonne from around $75 in February.
Core earnings before interest, taxes, depreciation and amortisation (EBITDA) for the third quarter rose 40 percent to $1.90 billion but missed the $1.97 billion expected by 11 analysts polled by Reuters.
Mittal has forecast a fall in core profit this year to above $4.5 billion from $5.2 billion in 2015.
ArcelorMittal increased its forecast for working capital to $1 billion from $500 million previously, adding it still expected to have positive cash flow for the year.
It said average prices for steel rose 7.4 percent in the third quarter, mainly driven by better prices in North America, Brazil and Europe.
ArcelorMittal also slightly improved its market outlook for China, where it now expects some growth in steel consumption.
Chinese prices for reinforcing bars used in construction rose this month to their highest level since September 2014 amid tightening supply.
Overcapacity in the Chinese steel sector has led to a surge in exports which steelmakers in Europe and the United States have sought to counteract by lobbying for anti-dumping duties.
Last week, China's Baosteel Group said it would cut steel production capacity by 11 million tonnes over 2016 and 2017, more than it had previously indicated.
Despite these announcements, Mittal said Chinese exports had so far not decreased and said China was not doing enough to lower exports.
"There is some progress but not enough. China imposed production limitations on the coal industry. They have the tools but are not acting as aggressively in the steel business," CFO Mittal said. (Reporting by Robert-Jan Bartunek; editing by Philip Blenkinsop and Jason Neely)
http://in.reuters.com/article/arcelormitta-results-idINL8N1D90TU
‘Global iron ore price to rule at $50-70/ton for 3-6 months’
Aided by growth in demand from China, the world’s largest steel maker, iron ore prices are expected to rule in the range of USD 50-70 per tonne in the near term, BMI Research said today. “We expect iron ore prices will trade between USD 50-70 a tonne over H1 2017 as additional Chinese stimulus measures will tighten the market, providing support to prices over the next six-to-nine months,” BMI Research, part of the Fitch Group, said in a statement.
However by 2018, the prices will re-test lows due to an over-supply in the seaborne iron ore market, driven by strong production in Australia and Brazil and weakening consumption growth in China, it added. “Whereas our previous core scenario expected the iron ore balance to loosen in H2 2016, providing downwards pressure on prices going into 2017, additional Chinese infrastructure stimulus measures will tighten the market, providing support to prices over the next six-to-nine months,” it explained. Iron ore prices will be supported by sustained demand from steel mills restocking iron ore as resilient Chinese steel prices will continue to incentivise domestic steel production.
In the long term, BMI Research said: “We have revised up iron ore forecast out to 2020, and expect iron ore prices to average USD 55 per tonne in 2017 and USD 48 a tonne in 2018, up from our previous forecast of USD 45 per tonne in both 2017 and 2018.” The upward revision is predicated on the agency’s core view turning more bullish towards metal prices. “We now see it likely that infrastructure stimulus measures by China will stay strong through to the end of 2017, rather than our previous core view for stimulus measures to fade in H2 2016,” it added. By 2017-end, prices will head lower as stimulus-driven ore price rally’s upside effects to ore consumption will fade, loosening the market, putting downwards pressure on prices.
The global iron ore market will continue to see strong supply from low-cost producing countries Australia and Brazil, the world’s second and third largest producers, respectively, which will only partially offset the slowdown in Chinese iron ore production, it said. “From 2018 onwards, continued high-cost Chinese iron ore production cuts and slowing growth from major producers will reduce the global oversupply, and thus prevent a further weakening of iron ore prices,” BMI Research said. This will sustain the existing trend of Chinese iron ore demand being increasingly met by seaborne iron ore imports, it added. Over the first 9 months of 2016, Chinese iron ore imports grew strongly, averaging 9.3 per cent year-on-year (y-o-y), in marked contrast to the muted 0.5 per cent growth in national steel production (iron ore demand) over that same period.
http://www.hellenicshippingnews.com/global-iron-ore-price-to-rule-at-50-70ton-for-3-6-months/
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Essel Mining & Industries Ltd
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