LAUNCESTON, AUSTRALIA – Coal’s bright start to the year in Asia is fading amid the gloom of weak demand across the region’s top importers and still too much supply from top producers.
The benchmark Newcastle weekly coal index ended at $51.13 a ton on April 1, down from its high so far this year of $52.59, reached on March 11. That peak capped a rally of 11 percent from the almost 10-year low of $47.37 a ton plumbed in the week to Jan. 21, but it now appears it was nothing more than a false dawn.
Coal was most likely the beneficiary of better sentiment towards commodities in general that saw strong rallies in iron ore and crude oil in recent weeks, which have also petered out.
But while there may be some positive fundamentals in other commodities markets, with tentative signs of a recovery in China’s vast manufacturing sector, there is no silver lining in sight for coal.
China’s official Purchasing Managers’ Index expanded for the first time in 9 months in March, rising to 50.2, up from February’s 49 to be just over the 50-line that demarcates expansion from contraction in the manufacturing sector.
While this may herald better times ahead for sectors such as iron ore, steel, aluminum, copper and crude oil, the joy is unlikely to be shared by coal.
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