Experts who warned three months ago that the skyrocketing international coal price was unsustainable may be patting themselves on the back.
The price for hard coking coal has plummeted US$32 a tonne in the last week - the biggest weekly drop in years - and the third consecutive weekly fall.
The price today was US$265/tonne, compared to US$297/tonne a week ago. It has plunged US$45/tonne since peaking at US$310/tonne last month.
The slide comes as Bathurst Resources considers reopening its Denniston Escarpment Mine and Phoenix Coal, a joint venture between Bathurst and Talley's Group, prepares to buy Solid Energy's Stockton export coal mine and Waikato domestic-supply coal mines Rotowaro and Maramarua.
Phoenix has agreed to pay $46 million cash, plus a contingent payment of up to $50m tied to coal sales revenue from Stockton.
The contingent payment only clicks in when coal prices are above $150 (US$108)/tonne.
The price rally began in June, after China cut its coal production. By September the price had almost doubled to US$157.50/tonne, but experts were pessimistic.
"This is not sustainable at all. Other mines will start opening very soon," an unnamed international source told S&P Global Platts, a leading provider of information on benchmark prices for the commodities and energy markets.
A mining.com article last month said the price rally was spurred by supply issues after Beijing decided to limit coal mines' operating days from 330 to 276 or fewer a year as it restructured the industry.
Chinese government stimulus plans, which increased steel production and power demand, had made things worse.
The article said future prices would adjust to reflect a more stable supply/demand dynamic with long-run pricing of around US$145/tonne.
- Westport News