High-cost US and Australian met coal mines to close in 2014, Moody’s says
US credit ratings agency Moody’s expects met coal prices to hit $170-175 per tonne in the medium term in 2014 , but not before lower prices lead to the closure of higher-cost mines in North America and Australia.
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Low prices forced more than 40 million tonnes of global met coal production offline in 2013 and sluggishness in the global steel markets will continue to put pressure met coal prices and challenge its producers.
Moody’s expects met coal prices to hover in the $150-160 per tonne range at the start of 2014 due to a “muted supplier response and continued weakness in the steel markets”, it said on December 11.
Moody’s believes that the global met coal market remains in oversupply.
“Supplies from Australia will increase as new projects that began when prices were higher come online. Those projects are generally closer geographically to their key markets and enjoy lower costs than their US peers,” said Moody’s.
“Recent improvements in productivity and a weaker Australian dollar have widened the Australian producers’ cost advantage,’ it added.
US coal mines sell about 60-70 million short tons of met coal into the export markets and roughly 20 million tons to domestic coke plants.
“Peabody Energy is the only US coal producer with mines in Australia, giving it the biggest near and medium term advantage compared to its US based peers,’ it said.
“US met coal producers tend to keep most of their future output uncommitted or unpriced, so met coal revenue is both less predictable and more susceptible to low spot prices than revenue for thermal coal,” Moody’s added.
US met coal producers will continue struggling with low met coal prices through mid-2015, according to Moody’s.