Trucks carry coal from a pit in Cerrejon, Colombia.RICARDO MAZALAN/The Associated Press
Coal's longest price decline in at least seven years shows no sign of ending as producers from Australia to Russia aren't cutting output, according to a seller owned by Anglo American Plc, BHP Billiton Ltd. and Glencore Plc.
By maintaining sales volumes, miners are banking on being the first to benefit from a revival in demand, according to Howard Gatiss, chief executive officer of Coal Marketing Co., the sole marketer of coal from Colombia's Cerrejon complex, the nation's largest producer. Prices for the fuel have fallen to the lowest since at least 2007 amid a 40 percent slump in demand from China, the world's largest user of commodities.
Record shipments may turn a deficit in the seaborne market last year into a surplus in 2015, according to Deutsche Bank AG. Alpha Natural Resources Inc. and Walter Energy Inc. are among at least eight U.S. miners that filed for bankruptcy protection this year as overcapacity, a slowing Chinese economy and lower natural gas prices eroded market share. U.S. coal production fell to its lowest since 1984 in June, according to the Energy Information Administration.
"There's been a general feeling for some time that we must be toward the bottom, so nobody has made the drastic production cuts that we have started to see in the U.S.," Gatiss said Aug. 11 in a phone interview from Dublin.
The global seaborne coal market may have a surplus of 10 million metric tons in 2015, compared with a 36 million-ton shortfall in 2014, according to Deutsche Bank. Analysts forecast world prices will increase in 2016, according to data compiled by Bloomberg.
European year-ahead coal fell 0.4 percent to $53.75 a metric ton Monday in London, according to broker data compiled by Bloomberg. The regional benchmark fell more than 70 percent since its 2008 peak.
Producers in countries from Australia to Colombia have seen local costs decline as their currencies weaken against the dollar. The Bloomberg Spot Dollar Index has risen 19 percent in the past 12 months. Coal is traded internationally in the U.S. currency.
"Many producing countries have been helped by a favorable exchange rate, which improved the relative economics of production in local currency and sales in dollars," Gatiss said. "You can see a reaction by everybody, which appears to be to want to hang on."
Australia exported 98 million tons of coal in the first half, up 3.8 percent from a year earlier. Russian shipments dropped 3.1 percent to 73 million tons in the first half from a record 75 million tons a year earlier, according to government data.
U.S. monthly coal production fell 16 percent to 66 million short tons in June from 79 million tons a year earlier, according to EIA data.
Glencore, Anglo American and BHP have equal stakes in CMC, according to its website.
Australia is in the strongest position among coal exporters, as it has the most stable political outlook and a government that is committed to supporting extractive industries, according to Gatiss.
"Australia is probably unique in being a solid, long-term investment opportunity, in the sense that whatever the costs and issues are, the government is strongly behind mining, there is a very solid long-term outlook for political stability of the country, there is low corruption, there is Anglo-Saxon law," he said. "This, of all the countries in the world, appears to be a good country in which to invest."