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Coal Production Increases On Weaker Australian Dollar

By  +Follow August 23, 2013 10:21AM
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The recent weakness of the Australian dollar is causing an uptick in coal production in the country that appears likely lead to a further increase in surplus, which for 2012 were already tallying at some 20 million tons.

The discovery of massive shale reserves in the US has led to a boom in oil and natural gas production, which has in turn taken a toll on domestic usage of coal as an energy supply. The story is different in rapidly developing countries, however, and Australian producers have been taking advantage of the struggling currency in order to increase output while overhead expenses are low. Indeed, coal shipments from the country are up over 13 percent on a year-over-year basis. According to the financial services firm Macquarie Group Ltd, the 17.6 million tons the country exported in June was a monthly record.

Higher exports have not come without consequences however. Australia’s Newcastle export terminals in New South Wales saw prices drop 10 percent in the same month to $77.75 per ton. Coal prices in Newcastle were down nearly 20 percent overall last year, and July’s average of $76.63 per ton was the lowest since fall of 2009.

Analysts have responded to this situation by reducing forecasts, as Goldman Sachs (GS) and Citigroup (C) both agree that coal prices in 2013 will be lower by around 7 percent. And the industry itself seems to be fully aware of the situation. Yancoal Australia Ltd., a Chinese-run operation, announced in its recently-released mid-year production results that the relatively stable demand that has persisted is being overtaken by growing surplus, as mining companies take advantage of currency conditions to produce more for less before having to contend with inevitable cost cutting measures.

The Australian Coal Association has recently noted that the strength of the Australian dollar in recent years accounts for some 30 percent on higher prices, and says that the industry is 11,000 jobs poorer as a result.

For the time being, however, demand is expected to stay strong enough to support a 7 percent projected increase to 183 million tons exported by the end of the year. Indonesia, the only country that exports more coal than Australia, could see exports up as much as 6 percent. For the time being, the difficult decision to cut output can and will continue to be postponed.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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Dividend Master
22 Oct 14 18:56:12
@Ayce2nd the same Buffet who just funded a tax inversion or invested huge in $GS $BAC ? Yup .....
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22 Oct 14 18:53:54
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22 Oct 14 18:11:02
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22 Oct 14 17:38:49
Goldman Sachs job question: How many manhole covers in NYC? Better: How many exploding manhole covers in NYC? | http://t.co/rhSglXvaEw $GS
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Free video w/setups October 23 "A Real Battle Here" $AMZN $GS $PCLN $AAPL http://t.co/8f3QoXwNM9
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$AUY Current Price Click Here: http://t.co/o7lXCEAqzh Also See: $UNG $GS $MU $SBOTF ~
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Manage risk in Options properly and profits wil come http://t.co/YoV732YcRG $GS $COST $FDX
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$AMBA Summary Click Here: http://t.co/F6tLMTwLHI Also See: $GS $AEP $PFE $AUY ~
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U.S. Court hears arguments on sex discrimination at Goldman Sachs. $GS, $SO, $MS. http://t.co/uD1BkRD3YA
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22 Oct 14 14:28:05
RT @SeekingAlpha: As Market Fear Heightens, Risky And Opaque Structured Notes Make A Comeback http://t.co/0vkXv4L8Jw $GS $CS $UBS
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22 Oct 14 14:27:37
$GS News: "As Market Fear Heightens, Risky And Opaque Structured Notes Make A…" http://t.co/Q2CV6mkqbm Board view: https://t.co/EBGrPPzJ2k
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22 Oct 14 14:27:37
As Market Fear Heightens, Risky And Opaque Structured Notes Make A Comeback http://t.co/0vkXv4L8Jw $GS $CS $UBS
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22 Oct 14 14:25:25
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22 Oct 14 14:15:36
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22 Oct 14 14:12:21
Our Penny Stock Picks Gained 371% In 2 Weeks! Get Our Next Pick Early: http://t.co/z2noBUWrEP $GS $ZION $ISRA
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22 Oct 14 14:10:41
Make 20 to 100% in a few hours with #daytrades http://t.co/dpbNxZbfHc $GS $COST $FDX
equities.com
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22 Oct 14 13:57:11
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Greta Salve
22 Oct 14 13:56:55
RT @GoldmanSachs: This year, $GS #CommunityTeamworks teamed up w/ @Habitatwc to build homes for returning #veterans. See the impact: http:/…
Jake Catskill
22 Oct 14 13:50:58
Here's the funny thing about the IPO boom, excess stock inventory on the banks books. I wonder how much $BABA is still in $GS and $MS?
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22 Oct 14 12:58:23
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22 Oct 14 12:52:48
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22 Oct 14 12:40:04
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22 Oct 14 12:32:05
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efc Students
22 Oct 14 11:53:57
RT @GSCareers: ICYM our #GoogleHangout: 6 Things To Know If You Want To Get a #Tech Job at $GS via @efc_global: http://t.co/31Uiym0Sag cc @…
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22 Oct 14 11:53:19
RT @GSCareers: ICYM our #GoogleHangout: 6 Things To Know If You Want To Get a #Tech Job at $GS via @efc_global: http://t.co/31Uiym0Sag cc @…
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22 Oct 14 11:37:29
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Gr8 Trades
22 Oct 14 11:36:10
$AAPL $AMZN $BIDU $FB $GILD $GMCR $GOOG $GPRO $GS $IWM $LNKD $MBLY $NFLX $PCLN $SPY $TSLA 2:36:07 PM
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22 Oct 14 11:32:49
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Estimize
22 Oct 14 11:32:26
@TrembFredrick The WS consensus for $GS Q4 2014 has shifted significantly downwards - http://t.co/aMcVJl47g3
maximus
22 Oct 14 11:26:51
bearish candle on $gs ...not good for mkt leader
smtrader StockTrader
22 Oct 14 11:26:11
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DK1
22 Oct 14 11:24:05
$GS http://t.co/KzVUwnZsSA
				
				
By  +Follow August 23, 2013 10:21AM
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