Oct 15 (Reuters) – These days you would expect a gathering of coal industry executives to be a fairly gloomy affair, given the drop in prices to near seven-year lows, the increasing threat of regulation to control pollution and the general image of the fuel as the main climate change culprit.
You might hope for a sense of realism and practical moves to address the issues, but instead the World Coal Conference in Copenhagen this week was characterised by what seemed like a state of denial.
The first instance of denial is over the causes of the dramatic slump in prices, with European API2 futures falling this week to the lowest since 2007, and nearly half of what they fetched in 2011.
Spot thermal coal at Australia’s Newcastle port fell to $64.92 a tonne in the week ended Oct. 10, 1 cent higher than the previous week, which was the lowest since mid-2009.
A common question among the hundreds of delegates at the conference in the Danish capital was what was the outlook for demand in China and India, the world’s two biggest coal importers.
While the state of demand in the two Asian giants is undoubtedly important, the question betrays the hopes of the questioner.
Miners, traders, shippers and others involved in the production and movement of coal are all fervently hoping for a demand-led revival.
And while it is indeed possible that there may be some increase in overall demand for seaborne coal this year in Asia, it’s likely to be modest and nowhere enough to give even false hope to those praying for a sustained recovery in buying.
India is the great hope, with imports on track to reach about 190 million tonnes in the fiscal year started April 2014, an increase from the 168 million tonnes in the 2013-14 year.
However, China is likely to import less this year, with inbound shipments in the first nine months of 222.85 million tonnes, a drop of 6.7 percent on the same period last year.
SUPPLY THE ISSUE
Rather than talking of when a revival in demand will boost prices, the industry has to face the reality that it is only the removal of excess supply that will allow for a modest price rally.
And here lies the problem. While high-cost suppliers to the Asian seaborne markets, such as the United States and Canada, have almost completely left the market, supply from Australia, the world’s biggest exporter of coal, is still growing.
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