Coal news and updates

Global markets to rise on China comeback: Adani CEO

The global coal markets, currently going through a trough due to record low prices, are likely to see better days ahead once China makes a comeback due to an expected reduction in its domestic production capacity, feels Vinaya Prakash, CEO (mining and trading), Adani Group.

The current low prices in the international markets, coupled with the fall in domestic demand, would result in a drop in China’s mining capacity, he said.

“Unlike India where we have a regulatory price, domestic prices in China are based on customers’ demand. So, I think, China is going to cut down its production, may be by 400-500 million tons (mt), these is our estimates. If that happens, China will start importing,” Prakash said.

Besides China, Korea, Taiwan, Vietnam and Thailand would see a surge in imports by another 150 mt over the next few years, he said, adding “that’s the plan that they have disclosed”.

“So, an additional 150 mt of imports from these four countries, coupled with another 100-150 mt from China and India, are likely to stabilise the market as it will bring demand and supply equilibrium,” he said.

On the supply side, Prakash said, “What is happening in Australia is that their currency has depreciated a lot and because of that they are still finding these export prices to be neck-to-neck. They are not bleeding actually. In Indonesia, it is happening differently. Here, the currency is depreciating, but its OB and coal contracts are in US dollars. So, the impact of the currency depreciation has not come into their cost and because of this Indonesia is bleeding at present. Therefore, Australian exports are still growing, while Indonesia’s exports are going down.”

As far as South Africa is concerned, he said, “They will remain the way they are, because in South Africa, the currency had depreciated a lot and their costs are in local currency. So, South Africa does not feel much impact, as is happening with Indonesia.”

Overall, “in the next two years, you will see equilibrium at 900 mt, though I don’t see the market going up to $100 per ton again. But definitely the market is going to go up from the current levels as I don’t see these numbers sustaining for long,” he said.