Article from WA today this morning regarding FE prices. Interesting bit for mine was the expected price stabilisation for the next 5 years and growing need of FE for the Indians:
Analysts from global consultancy Wood Mackenzie had some surprisingly upbeat news for Australia's struggling coal sector, countering perceptions that quite a few mines are under water at current prices and at risk of closure.
Fronting a media briefing in Sydney this morning, WoodMac's head of coal supply research Ben Willacy said that Australian producers of metallurgical coal are holding up well at today's "extremely low" prices, and said only a few operators were incentivised to close mines.
Benchmark quarterly prices are at $US120 a tonne, the lowest they've been for six years and there's still plenty of supply available. After a down-trend for the last four years, about half of the world’s mines aren't making money, judging by the global cost curve.
However Australian producers have been very successful in taking an axe to costs, and pushing up supply to lower unit costs of production, Willacy said. As a result, several mines owned by the majors such as BHP Billion Mitsubishi Alliance, Anglo American and Rio Tinto are actually making a "decent margin" at the contract. Longer term, the picture is more positive, with China driving demand growth, then India later on. The need for green-field project development from 2018 onwards to meet higher demand is "good news for producers", because prices will have to rise to get projects off the ground.
But the analysts warn that it’s a gloomy picture on the iron ore front.
The $US120 average for top quality 62 per cent grade in the March quarter is "as good as it's going to get for iron orein the next five years in terms of the quarterly average," Gray says. Discounts for lower grade material such as the low-grade fines exported by Fortescue Metalswidened significantly in the March quarter and are probably set to widen again this quarter.
