Coal prices fall to 12-year lows as global demand slows; China, India too cut buys

Coal futures have fallen to 12-year lows, hit by soaring production and a slowdown in global buying, including from India and China which have until recently been pillars of strong demand.

Benchmark API2 2016 coal futures last settled at $52.85 a tonne, a level not seen since November 2003. The contract is now over 75 per cent below its 2008 peak.

The price fall follows a rise in output from exporters like Australia at the same time as a sharp slowdown in overseas orders from major importers like the US, China and India. The steady and sharp fall in coal prices has knocked down shares of big mining companies like BHP Billiton, Glencore and Rio Tinto, and it has seen many financers exit the sector.

“Indian coal imports are now under pressure ... Both thermal and met coal imports ran at their weakest annualised rates since October 2014,” Australian bank Macquarie said on Wednesday. “Such a fall might not be just a temporary blip. On the thermal coal side we have seen power plant inventories reach record high levels, domestic production growth improve significantly and demand growth slow,” it added.

Thermal coal is used in power plants while metallurgical coal is used to make iron ore.

In the US, soaring natural gas from shale formations has made gas much cheaper, eating into coal’s US power generation share, and the government also plans to move away from coal for environmental reasons.

Demand in Europe has been flat as energy efficiency improves, renewables take increasing shares of the power mix and many of its economies struggle to grow.

Gold prices rose 1 per cent on Wednesday as concerns over the Chinese economy knocked equities, and ahead of minutes of the Federal Reserve's last policy meeting, which could give fresh clues on whether US interest rates will rise next month.

Spot gold was at $1,126.38 an ounce. US gold futures for December delivery were at $1,125.70. Spot platinum was up 0.9 per cent at $999.75 and palladium was up 1.3 per cent at $602.47. Silver gained 2.4 per cent at $15.18/oz.

Copper slipped on Wednesday as persistent concerns over Chinese demand kept prices near six-year lows. Three-month copper on the London Metal Exchange was bid at $5,005 a tonne . Tin was bid up 1.4 per cent at $15,350 a tonne.

Aluminium was down 0.1 per cent at $1,552; nickel gained 0.2 per cent at $10,380. Lead was up 0.2 per cent at $1,695 and zinc was at $1,776.

Oil’s biggest rally in a week stalled on speculation that increased OPEC output will extend a global supply surplus.

Iraq, the second-biggest member of the Organisation of Petroleum Exporting Countries, said a production boost was important to meet the needs of its growing population, while Angola will export the most crude in four years during October.

West Texas Intermediate for September delivery, fell to $42.16 a barrel on the New York Mercantile Exchange. Brent for October settlement was at $48.80 a barrel on the ICE Futures Europe exchange. The European benchmark crude traded at a premium of $5.89 to WTI for the same month.

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