Coal Prices to Rise in Face of La Niña
Coal Industry Must Brace for Coming Rains
Coal producing miners better get their act together and prepare this early for a possible weather disturbance of a returning La Niña.
According to Australia's Bureau of Meteorology, miners may expect above-average rainfall by as much as 65 per cent to 70 per cent in parts of Northern Queensland in the rest of the year.
The scenario of another possible supply disruption will push coking coal prices to surge, similar to the record rains that flooded Australia last year.
Analysts predict coal spices may reach more than 20 per cent to about $350 a metric ton, if the supply interruption is similar to last year's. The previous La Nina not only shut mines but also sent coking coal prices to a record $330 a ton in the June quarter.
"Last year was a near record La Nina event, possibly the second strongest since 1917-1918," Andrew Watkins, Australia's Bureau of Meteorology manager of climate prediction told Reuters. "About 50 percent of the time a La Nina follows a La Nina, so it's not that uncommon to have a double whammy."
Analysts say that a prolonged period of supply interruption would correlate to a sharp rise in the next quarterly contract of the commodity.
Contract prices have fallen from their second-quarter record amid fiscal chaos in global markets and as China moved to a manufacturing contraction and slowed economic growth.
The November-to-April wet season in Queensland was recorded as the second wettest registering more than 905 millimeters of rain, the bureau said, while the August-to-April period was the nation's wettest on record. The Bowen Basin received 350 millimeters of rain last December.
Imports of coking coal by China are seen to average at 9 per cent a year to reach 73 million metric tons in 2016, according to Australian government forecasts. While India may triple coking coal imports within five years to meet surging demand from steelmakers.