COLUMN-Coal exporters should fret as China, India become policy-driven markets – by Clyde Russell (Reuters U.S. – May 17, 2017)

May 17, 2017 – Coal exporters may be feeling more comfortable about their future as they see both reasonable demand from Asia’s top importers and prices which appear to be stabilising at levels that allow for decent profits.

This renewed optimism was evident at this week’s Coaltrans Asia conference on the Indonesian resort island of Bali, where much of the discussion among delegates at the region’s biggest coal event was on plans for new capital spending and boosting output at existing mines.

But – and there is always a “but” for the coal sector in recent years – the exporting miners have to face the uncomfortable reality that the two biggest importers in the world, China and India, are now markets where policy decisions are the main drivers, not supply and demand fundamentals.

This makes the long-term outlook for the seaborne coal market hard to predict and therefore difficult to plan for, presenting a tricky dilemma for coal mining companies in top exporters Australia, Indonesia and South Africa.

The research consultancies a mining company may employ, for example, provide what seem like reasonable demand assumptions for China and India, based on current trends and likely future energy needs. But their assumptions can be rendered nonsensical very quickly by unexpected and unpredictable policy shifts in Beijing and New Delhi.

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