Chinese Imports Lift Prices; Extreme Weather May Add To Gain
For all the predictions about the death of coal, it's now one of the hottest commodities in the world. The resurrection may have further to run.
A surge in Chinese imports to compensate for lower domestic production has seen European prices jump to near an 18-month high, while Australia's benchmark is set for the first annual gain since 2010.
At the start of the year, prices languished near decade lows because of waning demand from utilities seeking to curb pollution and amid the International Energy Agency's declaration that the fuel's golden age in China was over. Now, traders are weighing the chances of extreme weather hitting major producers and China further boosting imports as factors that could push prices even higher.
“It's a commodity that's been on a slippery slide for the past four years and it's making a remarkable recovery,” said Erik Stavseth, an analyst at Arctic Securities in Oslo, who's tracked the market for almost a decade. “There's a strong pulse.”
What could light up the market further is the occurrence of a La Nina weather pattern. Last time, it happened in 2010 and 2011, heavy rains flooded mines in Australia and Indonesia, the world's two largest exporters. While some meteorologists have toned down their predictions for the weather phenomenon forming and having a lasting impact “another strong forecast“ would cause prices to rise further, according to Fitch Group Inc's BMI Research.
La Nina systems can last for as long as two years, occurring when the surface of the equatorial Pacific cools, shifting weather patterns across the world. Named by fishermen in Latin America, La Nina is the “The Girl,“ which often follows an El Nino, or “The boy.”
The Japan Meteorological Agency said that a La Nina has already set in and that there's a 70% chance that it will continue into the winter. That's in contrast to the US Weather Service's Climate Prediction Center which downgraded the chance of the event happening to 35 to 45%, compared with as high as 75% in June. Australia rates the possibility at 50%.
While zinc is this year's best performing commodity , climbing more than 41%, coal is not far off. Contracts for delivery next quarter to Amsterdam, Rotterdam and Antwerp gained 30% this year, while Australian benchmark contracts rose 40%.
That compares with the Bloomberg Commodities Index of 24 raw materials, which rose 7.9% this year. Coal isn't in the gauge.
And over in India, Coal India, the world's biggest miner of the fuel, last week reported the lowest production in three years as heavy rains and protests cut its output. The miners are demanding more jobs and higher wages.
For all the predictions about the death of coal, it's now one of the hottest commodities in the world. The resurrection may have further to run.
A surge in Chinese imports to compensate for lower domestic production has seen European prices jump to near an 18-month high, while Australia's benchmark is set for the first annual gain since 2010.
At the start of the year, prices languished near decade lows because of waning demand from utilities seeking to curb pollution and amid the International Energy Agency's declaration that the fuel's golden age in China was over. Now, traders are weighing the chances of extreme weather hitting major producers and China further boosting imports as factors that could push prices even higher.
“It's a commodity that's been on a slippery slide for the past four years and it's making a remarkable recovery,” said Erik Stavseth, an analyst at Arctic Securities in Oslo, who's tracked the market for almost a decade. “There's a strong pulse.”
What could light up the market further is the occurrence of a La Nina weather pattern. Last time, it happened in 2010 and 2011, heavy rains flooded mines in Australia and Indonesia, the world's two largest exporters. While some meteorologists have toned down their predictions for the weather phenomenon forming and having a lasting impact “another strong forecast“ would cause prices to rise further, according to Fitch Group Inc's BMI Research.
La Nina systems can last for as long as two years, occurring when the surface of the equatorial Pacific cools, shifting weather patterns across the world. Named by fishermen in Latin America, La Nina is the “The Girl,“ which often follows an El Nino, or “The boy.”
The Japan Meteorological Agency said that a La Nina has already set in and that there's a 70% chance that it will continue into the winter. That's in contrast to the US Weather Service's Climate Prediction Center which downgraded the chance of the event happening to 35 to 45%, compared with as high as 75% in June. Australia rates the possibility at 50%.
While zinc is this year's best performing commodity , climbing more than 41%, coal is not far off. Contracts for delivery next quarter to Amsterdam, Rotterdam and Antwerp gained 30% this year, while Australian benchmark contracts rose 40%.
That compares with the Bloomberg Commodities Index of 24 raw materials, which rose 7.9% this year. Coal isn't in the gauge.
And over in India, Coal India, the world's biggest miner of the fuel, last week reported the lowest production in three years as heavy rains and protests cut its output. The miners are demanding more jobs and higher wages.
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