Anglo Sees Coal Prices Curbed by U.S. Exports, Renewables

Power-station coal prices may not rise much above $100 a metric ton on average this year, said the head of thermal coal at Anglo American Plc (AAL), which operates the Cerrejon mine with BHP Billiton Ltd. (BHP) and Xstrata Plc. (XTA)

“Prices are around $103, and they’re under pressure,” Norman Mbazima said in an interview in Johannesburg yesterday. “But we are starting to see some support at that level, so I’d expect that we shouldn’t end up below $100 for the year. It’s not great, but it’s still profitable for us.”

Anglo is considering digging the New Largo and Elders mines in South Africa and looking at a second phase expansion at Cerrejon mine in Colombia with its partners as it bets on higher demand for the power-plant fuel. The London-based company is also seeking coal acquisitions in countries including Colombia, Indonesia and Mozambique.

While coal prices are likely to improve next year, they probably won’t return to the levels seen in 2011, Mbazima said. Coal shipped through South Africa’s Richards Bay Coal Terminal, the largest export harbor for the fuel in the country where Anglo has most of its mines, climbed as high as $128.62 a ton in January last year, according to Hampshire-based IHS McCloskey data on Bloomberg. They’ve fallen by a fifth since then.

Gas Supplies

“There’s a lot of issues that will keep holding it down,” Mbazima said. These include supplies of gas and shale gas, especially in the U.S., which would result in continued exports from that country, affecting prices on international markets, he said. European demand will probably remain “flat,” he said, partly because of the use of renewable energy.

Sustained increases in demand are expected in India and China “and to some extent in Japan to replace some of the lost nuclear capacity,” he said. “Those markets are going to be the ones holding up the prices above the $100.”

Anglo retreated 2.3 percent to 2,387 pence by 9:44 a.m. in London, heading for the lowest closing level since Dec. 30.

To contact the reporter on this story: Carli Cooke in Johannesburg at clourens@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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