BHP Billiton Signals Confidence in Its Coal Business – by Rhiannon Hoyle (Wall Street Journal – April 2, 2014)

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Coal Chief Speaks Out as Group Mulls Asset Sales

SYDNEY—The head of BHP Billiton Ltd. BHP.AU +0.86%’s coal business signaled confidence in the outlook for the strained global coal industry, forecasting increases in world demand for decades to come.

Dean Dalla Valle said he expects most demand growth to come from outside China, which has been the primary driver of global commodity prices in recent years. China currently accounts for about half of the world’s coal consumption.

“Over the next couple of decades we expect global growth in demand for both energy coal and metallurgical coal,” he said in a speech in Brisbane Wednesday. Although “the likes of India, a country not overly endowed with metallurgical coal, [is] anticipated to be the most significant source of new demand” for coal used in steelmaking, he said.

India is the world’s third-largest importer of coal, after China and Japan, according to the World Coal Association. China, the largest producer of metallurgical coal, will continue to be a major importer of the raw material from mining hubs like Australia and Indonesia, Mr. Dalla Valle said. Additional Chinese demand for steelmaking coal is expected to be mostly met by domestic mines.

Demand for energy coal, otherwise known as thermal coal, is also expected to rise—although Mr. Dalla Valle acknowledged growth rates will likely be lower than for other energy sources like gas and renewables.

“Coal is expected to remain the centerpiece of Asia’s energy portfolio into the foreseeable future, where coal is the cheapest and most readily available source of energy,” said Mr. Dalla Valle. Coal demand in Europe has also been rebounding, he said, as nuclear plants are slated for closure and some countries seek to cut their reliance on Russian gas supplies.

Coal prices have lately been languishing near multiyear lows. New mines that had planned to capitalize on earlier high prices started production, which left the market with a glut of raw material. Thermal-coal prices in Australia have been trading near their lowest level since late 2009, while metallurgical coal is near a seven-year low.

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