Coal Traders See End of Price Rally as China Ramps Up Output – by Ladka Mortkowitz Bauerova (Bloomberg News – December 21, 2016)

https://www.bloomberg.com/

Coal’s recovery was one of the biggest surprises in commodities this year, but it’s all poised to end as output rises from China, producer of half the world’s supply.

After half a decade of declines, European prices rebounded more than 80 percent as China, also the world’s biggest consumer of the fuel, boosted imports. Benchmark month-ahead contracts will fall by more than 25 percent by the end of next year, according to the median in a Bloomberg survey of six analysts and traders.

Just as Chinese policy limiting mining days kick-started the rally, a gradual boost in domestic output during autumn will accelerate a slide, according to analysts. Once seasonal winter demand in the northern hemisphere is over, China will need less imports at the same time as abundant output by other producers will keep a lid on prices from Australia to Antwerp.

“The market is going to be determined by whatever the Chinese are going to do,” said Thomas Pugh, a commodities economist at Capital Economics Ltd. in London, who predicted a price of $60 in the survey. “Everything else fades into the background.”

Forecasts ranged from $57.50 to $75 a ton, with the median at $60. Month-ahead fuel for delivery to Amsterdam, Rotterdam or Antwerp was little changed at $82.75 at 10:41 a.m. in London. Coal at Australia’s Newcastle port, as well as front-month futures on China’s Zhengzhou Commodity Exchange, are up more than 70 percent this year.

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