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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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GS 183.17 Stock Charts $GS Goldman Sachs Group Inc. (NYSE) Last Updated: 09/15/2014 01:01:03 GS Stock Chart - http://t.co/Lf82sYSEru
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14 Sep 14 22:07:45
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$GS joined fellow $XBD member, $MS & cleared an 8 month base.
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14 Sep 14 21:45:09
Why is $GS buying sponsored tweets to get people to attend their hiring webinar?
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14 Sep 14 20:48:11
shd be interesting how the markets open tomorrow morning .. if the downside action was done in the futures & not tomorrow.lol $SPX $GS $DJIA
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14 Sep 14 20:44:44
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14 Sep 14 20:43:54
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Dan
14 Sep 14 20:12:13
$GS high open interest range is 172.50 to 180.00 for option expiration 09/20/2014. http://t.co/gLCt6oegUL
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14 Sep 14 20:00:21
$GS Max Pain = 175.00. Maturity = 09/20/2014. Previous close = 183.17. http://t.co/CsLBeoWZ6L
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14 Sep 14 19:39:31
$GS broke out from a very important level this week. Measure move is to $200. $BABA hype will help.
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Joe
14 Sep 14 18:18:03
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14 Sep 14 18:17:07
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14 Sep 14 18:04:23
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14 Sep 14 17:49:44
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14 Sep 14 17:49:44
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Yeti Corp
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AmericanEnergyFields
14 Sep 14 17:49:43
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Clear Skies Solar
14 Sep 14 17:49:42
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NW Exec
14 Sep 14 17:49:42
Bank Shot Goes In The Hole.: Banks are big and $WFC,$BAC, $JPM, $GS as well as $C are the ones we have been pr... http://t.co/EoXXJ9BK9P
Sha.
14 Sep 14 17:46:01
RT @GoldmanSachs: VIDEO: $GS chief Japan strategist Kathy Matsui discusses the challenges of Womenomics in Japan with @NHKWorld_TV http://t…
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14 Sep 14 17:10:48
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14 Sep 14 16:44:29
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14 Sep 14 16:29:06
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14 Sep 14 16:02:21
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14 Sep 14 15:18:37
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14 Sep 14 15:00:17
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ExileonBaySt
14 Sep 14 14:14:44
Correction: Earnings Wed $GIS not $GS.
ExileonBaySt
14 Sep 14 14:11:57
Earnings: Mon $ALOG, Tues $ADBE, $FDS, Wed $GS, $FDX, $SCHL, $CBRL, $CTAS Thurs $ORCL, $CAG, $RHT, $RAD, $TIBX.
Dan
14 Sep 14 13:12:06
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Dan
14 Sep 14 13:00:57
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14 Sep 14 12:38:47
RT @Couzin_Vinny: New BLOG POST “Pocket Pivot Scan - Banks Strengthen” $GS $BAC $WFC $STT $MS $KRE REITs weaken on $TNX breakout http://t.…
				
				
By  +Follow August 23, 2013 10:21AM
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