New Hope Sees Thermal Coal Demand Climbing Toward End 2017

  • No ‘material’ demand increase yet from China tightening supply
  • Newcastle thermal price gained about 41% this year: Globalcoal

New Hope Corp., an Australian coal producer, said demand for the fuel used in power stations will increase only toward the end of 2017, as the current jump in prices reflects supply constraints in China.

While tightness in the Chinese domestic market has led to a surge in spot seaborne prices, there hasn’t been a “material increase in demand,” New Hope Chief Executive Shane Stephan said Tuesday. Newcastle coal, an Asian benchmark, has advanced about 41 percent this year and on Monday reached the highest level since February 2015, according to data from Globalcoal.

“We look to the back end of the next calendar year to see an increase in demand out of South Korea, Japan, Taiwan and Philippines for high-quality Australian thermal coal,” Stephan said. There is an increase in inquiries from customers, but a boost in orders will not flow through until late 2017.

Coal prices are heading for the first annual advance in six years as China’s efforts to trim industrial oversupply and curb pollution lead to an increase in the nation’s imports and a surge in spot prices. 

‘Boosting Efficiencies’

New Hope will focus on developing its New Acland and North Surat projects, and “boosting efficiencies” at the Bengalla mine rather than bidding for other Australian assets. New Hope purchased a 40 percent stake in the Bengalla coal venture in the Hunter Valley region of New South Wales last year from Rio Tinto Group.

New Hope on Tuesday posted a full year loss of A$53.7 million ($40.6 million) for the year ended July 31, citing lower commodity prices and impairment charges.

Newcastle coal climbed to $71.25 a metric ton on Monday after rising the previous four months, according to Globalcoal. China’s output cuts, combined with flooding in the Shanxi province, has also led to a more than doubling of the metallurgical coal price this year to $205.90 a ton.

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