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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.

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Trusted Stocks
1 Sep 15 13:15:12
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1 Sep 15 13:00:12
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1 Sep 15 12:42:06
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1 Sep 15 12:19:19
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1 Sep 15 12:11:02
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1 Sep 15 11:13:22
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1 Sep 15 10:57:44
RT @KevinBCook: $SPY $GS was saying over weekend that $VIX pricing in recession fear when there should be none. Clearly ISM slipping to 51 …
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1 Sep 15 10:42:45
A slightly different audience in $GS auditorium today as #London office celebrates 'Bring Your Children to Work Day' http://t.co/yvcqzwJItR
Goldman Sachs
1 Sep 15 10:42:44
A slightly different audience in $GS auditorium today as #London office celebrates 'Bring Your Children to Work Day' http://t.co/xTB6XxBxiG
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1 Sep 15 10:32:33
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BoB T
1 Sep 15 10:29:32
Goldman Sach $GS & Citigroup $C agree that the near-parabolic trajectory of oil prices $USO has been driven by a shift in sentiment (1 of 2)
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1 Sep 15 10:24:23
RT @_TradeFollowers: $GS leaving the daily short watch list. https://t.co/uMN26yhv3h
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1 Sep 15 10:17:00
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1 Sep 15 10:15:04
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1 Sep 15 09:44:08
RT @ibd_dchung: Bad Hair Tuesday: For Bulge-Bracket Banks. $C $JPM $GS $USB all down hard, below 200-day MAs. Fed rate hike hopes dimming?
Analyst Actions
1 Sep 15 09:42:02
$GS: Bullish analyst action by Evercore ISI on Goldman Sachs Group: http://t.co/DncTubtEKD http://t.co/PxFQ6lBaq8
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1 Sep 15 09:01:39
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1 Sep 15 08:30:33
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1 Sep 15 08:28:48
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1 Sep 15 08:25:21
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1 Sep 15 08:23:55
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By  +Follow August 23, 2013 10:21AM
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