Has Australian Coal Reached Its Zenith?
Speculations are abuzz that Australia's coal market is nearing its zenith, what with the latest move of Australian coal miner New Hope Corp. to be bought out to the tune of $5 billion.
The Queensland-based thermal coal producer voluntarily put itself up for auction earlier this month after receiving several bid approaches from interested parties.
Among those interested were India's No.3 steelmaker, JSW Steel Ltd., China's Yanzhou Coal Mining Co. Ltd. and London-listed Xstrata.
A takeover of New Hope would come as the latest in a string of deals in Australia's coal sector. But while its wholly-owned port facility makes it attractive to potential suitors, analysts and bankers said the actual sale could take some time as complications need to be threshed out on its ownership structure and the high price tag.
"New Hope is really flexible. Any reasonable offer for assets or the whole company will be welcomed," a source told Reuters. "The way ahead, given valuation expectations and global economic uncertainty, would be break up and sale of assets. They are not wedded to doing it one piece."
New Hope is among the last major coal companies left in Australia after a flurry of recent takeovers consolidated the industry. Its key assets include the New Acland mine, Colton Mine and some exploration assets.
Meanwhile, HSBC projected Australian cargo prices of coal will withdraw in the last quarter. China has slashed importing coking coal from Australia, initially due to the flooding in Queensland, but also because Mongolia has lower delivered costs compared to Australia.
HSBC said that from January to August this year China is expected to lower its coal import of 5.6 million tonnes from Australia representing a 51 per cent drop, while it will be the reverse from other countries: 3.35 million tonnes from the U.S. marking a 34 per cent increase and 11.35 million tonnes from Mongolia - a 34 per cent jump.
Weak demand in the rest of the world and stable yet slowing growth in China will put a cap on further price rises.
HSBC sees a small decline in December, and as such, both thermal and coking coal prices should be a little softer next year for consumers in North America and Europe.