SINGAPORE (Reuters) – Australian and Indonesian miners have quietly done in the last two years what OPEC has been shouting about: tighten coal markets and prop up prices.
The informal coal output reductions, unlike the official cuts in place since January led by the Organization of the Petroleum Exporting Countries (OPEC), are culminating right as Asia enters the Northern Hemisphere winter when heating demand peaks in January. Additionally, there are warnings a La Nina pattern that typically brings colder-than-normal weather to the Northern Hemisphere might occur.
In 2015, at the peak of the coal glut, Glencore, the world’s biggest thermal coal exporting firm, said it would start cutting exports by scaling back some open pit mining and deferring investments in Australia in order to tackle oversupply. Indonesian mines were quick to follow.
Production from Indonesia and Australia, Asia’s biggest thermal coal suppliers, dipped from almost 600 million tonnes in 2013 to 566 million in 2016, according to government and industry data. Meanwhile, demand from North Asia’s main consumers China, Japan, South Korea and Taiwan has risen by 5 percent since 2015.
David Thurtell, resource economics manager for Australia’s Department of Industry, Innovation and Science said the country’s supply has dropped by between 1 million and 2 million tonnes this year, enough to “tighten up the market and firm up pricing against a pretty solid demand background.”