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Coal prices may dip on global commodity fall

16 May 2011 Evaluate

Coal prices may soften in the coming months, bringing respite to steel, cement and power companies. The market expectation is that coking coal price will depreciate by $30-$40 per tonne, while the price of thermal coal will decrease by $10 per tonne. A drop in global commodity prices and softening of crude oil, coupled with sluggish demand from Japan are likely to have a cooling effect on coal prices. Australian coking coal futures is hovering around $330 per tonne and the spot price is $320.

India imports around 92 million tonne coal annually. Of this, the country imports 28 million coking coal and the rest 64 million tonne is thermal coking coal. India produces around 4 million tonne coking coal annually. In fact, the Planning Commission has forecast coal shortage in India will soar to 200 million tonne by the end of the 12th Plan (2012-17), with a demand of 1,000 million tonne against a production of 800 million tonne. Next year, the shortage is expected to be around 142 million tonne with availability of 554 million tonne and against a requirement of 696 million tonne. According to market dynamics, this will put a pressure on coking coal suppliers to bring down prices. A correction in price is imminent. It has gone up from $225 per tonne to $330 per tonne over a period of six months.

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